Investing in agricultural risk management

By any measure, agriculture is risky senegal_sdgs_blogbusiness. It is also vital to ensuring food security and providing employment for 2.6 billion people worldwide, the vast majority of whom are subsistence farmers. Producing more than two-thirds of all food consumed worldwide on roughly half of the world’s arable land, these farmers are also the poorest, the most vulnerable, the most food insecure on earth.

The World Bank is spearheading a global initiative to promote a better understanding of agricultural risks, as well as effective pathways to improved risk management. In addition to enabling agriculture risk knowledge sharing through the FARMD platform, the Bank has worked with nearly 20 countries to help agricultural stakeholders better comprehend the complexity of risks. This knowledge aids the selection of risk mitigation, transfer, and coping investments.

Based on this experience, the Bank has developed the Agricultural Sector Risk Assessment (ASRA), a conceptual framework that helps identify, measure and prioritize risk for improved targeting of risk management solutions. The analysis enables estimates regarding the frequency of historical risk events and the scale of attributed losses. These data points can assist governments, the private sector and other agricultural stakeholders to size up the costs of inaction and  prioritize investments and policy choices that will strengthen resilience.

While the experience of conducting risk assessments depends on myriad factors and outcomes have varied across countries, there is broad recognition of ASRA’s usefulness as a practical tool for informed decision making. Outcomes from risk assessments have helped inform public policy and investments in a growing number of countries. In Niger, ASRA findings have helped shape the Government’s 10-year action plan for managing agriculture risks, and in Kenya, the Governments 2015-2030 program on Climate Smart Agriculture. In South America, ASRA helped define a core pillar of the Bank’s engagement with Paraguay, which focuses on strengthening agricultural resilience while reducing risk and volatility.​

Toward shared goals

With climate change, the risky business of agriculture will only get riskier. By investing in ex ante risk mitigation and climate smart technologies, developing countries can kick-start the emergence of more productive, more resilient, and more sustainable food systems capable of feeding a population expected to top 9.5 billion people by 2050. Well aligned with its Twin Goals, the World Bank is committed to supporting these investments.

The benefits of improved agricultural risk management are multifold. Reducing production losses helps boost productivity. Curbing volatility can help protect rural jobs, incomes, and household food security. More diversified production systems and improved management of natural resources (e.g., soil, water, rangelands) can help strengthen biodiversity. By taming uncertainty, agricultural risk management also helps create a more predictable environment for investments and sustained sector growth.

​Today, 1 in 9 people globally, or 1 of 4 in Africa, face a daily food deficit. This is often attributed to low fertilizer use rates, land degradation, restrictive trade policies, and other binding constraints. Too often overlooked are the debilitating impacts from unmanaged risks. Unless we invest more in stronger, more resilient agriculture, the number of hungry people in the world may well go up, not down. And that’s a risk we can’t afford to take.

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