Risk and Risk Management in Agriculture

Basically, risk is the chance of something happening that will impact on the objectives of farmers. Chance implies uncertainty and hence risk management in agriculture basically involves managing uncertainty.

As Hay (2007) explained, risk levels can change, including as a result of potentially detrimental changes in the climate (e.g. warming, decreasing rainfall). Changes in levels of exposure, due to altering levels of investment, also influence risk levels. Risk combines both the likelihood of a harm occurring and the con sequences of it doing so. ttus according to Hay (2007), in risk terms, an unlikely hazard or condition causing considerable harm (e.g. a category 5 hurricane, such the cyclone in the state of Orissa that devastated parts of India in 1999), may be compared to a hazard or condition which causes less harm but has a higher probability of occurrence (e.g. a seasonal drought).

Risk management research recognizes that decisions in agriculture involve both risk assessment and specific actions taken to reduce, hedge, transfer or mitigate risk (Wandel and Smit 2000). Risk management strategies in agriculture could involve:

• Avoiding the dangers

• Preventing/reducing the frequency of impacts

• Controlling/reducing the consequences (adaptation measures)

• Transferring the risk (e.g. insurance)

• Responding appropriately to incidents/accidents (e.g. disaster management)

• Recovering or rehabilitating as soon as possible (e.g. media response)

As Hay (2007) described, increasingly, farm managers and other practitioners are seeking more rational and quantitative guidance for decision making, including cost benefit analyses. A risk-based approach to managing the adverse consequences of weather extremes and climate anomalies for agriculture can indeed provide a direct functional link between, on the one hand, assessing exposure to the adverse consequences of extreme weather and anomalous climatic conditions and, on the other, the identification, prioritization and retrospective evaluation of management interventions designed to reduce anticipated consequences to tolerable levels.

Coping with agrometeorological risk and uncertainties is the process of assessing agrometeorological risks and uncertainties and then developing strategies to cope with these risks. High preparedness, prior knowledge of the timing and magnitude of weather events and climatic anomalies and effective recovery plans will do much to reduce their impact on production levels, on land resources and on other assets such as structures and infrastructure and natural ecosystems that are integral to agricultural operations (Hay 2007). When user-focused weather and climate information are readily available, and used wisely by farmers and others in the agriculture sector, losses resulting from adverse weather and climatic conditions can be minimized, thereby improving the yield and quality of agricultural products (Hay 2007).

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