Overview William Dick Commodity Risk Management Group Agriculture and Rural Development Department

1. Managing Risk in Financing Agriculture - Expert Meeting Overview William Dick Commodity Risk Management Group Agriculture and Rural Development Department World Bank Johannesburg, April 2009

2. Agri/Agbiz = Risky Business Risk + uncertainty widespread in food/ agri system: Agro-climatic factors Complex biological/environmental processes Geographical span of supply chains Political economy of food/agriculture Major structural and demographic changes Risky business = ‘old risks’ + ‘new risks’ ‘Old Risks’: weather, price variability, pests, logistical bottlenecks, food safety hazards, policy shifts ‘New Risks’: climate change, new disease transmission, biosafety, bioterrorism, environmental imprint + social concerns

3. Managing Agricultural Risk Before the Event EX ANTE After the Event EX POST Event Occurs STRATEGIES INFORMAL Individual- or Community-based INFORMAL Individual- or Community-based FORMAL Market- or Policy-based FORMAL Market- or Policy-based TIME FRAME 3

4. Issues common to finance and insurance Needs for risk assessment and data Ex ante risk planning and ex post risk solutions (financing) Risk retention, risk transfer, “layering” of risk Technical, organisational and financial planning Packaging/bundling of credit and insurance Entry points and distribution Appropriate insurance products Collateral enhancement Legal and regulatory Public/private roles Profitability in the supply chain

5. Country Agricultural Risk Management Model Institutional capacity building Data management Regulatory/supervisory framework Information and education Technical expertise Program administration and monitoring Agri-business segmentation Social vs commercial insurance Traditional farming sector Emerging farming sector Commercial farming sector Country Agricultural Risk Management Agricultural risk financing Risk layering Insurance index Insurance pool Insurance and rural finance Agricultural risk assessment Risk identification Risk quantification Probabilistic agricultural risk model

6. Risk Factors Effect Weather Rainfall and temperature variability or extreme event Lower yields and loss of income/assets Price Market forces inside and outside the country; local and international supply and demand Lower prices and loss of income Biology Disease, pest, contamination Reduced yield; loss of assets/income Labor Illness, death, injury Loss of income Logistical Breakdowns, bottlenecks, price shifts for product storage and transport Loss of income; market dissatisfaction Regulatory/Policy Regulatory changes or inconsistent application, both inside and outside the country Changes in costs, taxes and market access Major Agricultural (Supply Chain) Risks