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Excerpt: Basic Criteria for Evaluating and Managing Risks

Within the internationally recognized field of agricultural risk assessment and management, all of these risks of these many categories can be evaluated according to three basic criteria:

  1. Impact: In other words, how severe will the risk event be if it actually happens? Some risks can destroy the whole year's farm income and even destroy assets; other risks are milder in impact.
  2. Likelihood: How likely is this risk to come about? Some risks are rare and unpredictable, others are more likely to happen.
  3. Manageability: Independent of how severe or how likely a risk is, some risks are out of the control of the farmer, others can be handled to a large or small degree. It makes sense to prioritize scarce resources on risks which can actually be managed.

In the actual process of prioritization, these criteria are combined to evaluate various risks in order to focus a risk management plan strategically. For example, in rural Uganda and South Sudan, fires set by neighbors to burn brush can threaten to destroy some or all crops planted. In some places, the likelihood of this happening is very high, and the severity of impact on loss of crops can also be high. But this risk is easily reduced by clearing a sufficiently large area around the field. So this risk ranks high in likelihood, severity, and manageability and thus would be a key part of a risk management plan. Likewise, if the farmer does not understand how markets work and how prices change, the risk of getting a disastrously low price for his or her crops or livestock, may also be likely and severe. However, this risk too is manageable if the farmer receives training in understanding markets and prices and in careful planning to reach markets at the right time that give the best price. Other risks, like unpredictable rainfall, may also be a risk of severe impact but of limited manageability; yet taking some action to mitigate this risk with conservation farming methods that retain water in the soil, or in irrigation schemes, or in production methods that can drain the excess water from too much rainfall may be worth including in a risk management plan depending on the cost of implementing them.

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