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WMO
Expert Advisory Group on
Financial Risk Transfer
(EAG-FRT I)
13-14 December, 2011
Geneva, Switzerland
Agricultural Risk Management Team
Agriculture and Rural Development Department
The World Bank
WB-ARMT Program Areas
• Agricultural Risk Management Framework
• Supply Chain Risk Assessments
• Weather Risk Management
• Price/Commodity Risk Management
• Capacity Building and Training in Agricultural Risk Management
• Forum for Agricultural Risk Management in Development FARMD
• Support to Sustainable Production Initiatives
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Types of Agricultural Risks
Production risks:
Drought
Flood
Pest and disease outbreak
Management failure
Market risks:
Volatility in output price
Variability in input price
Exchange rate volatility
Counterparty risk / default risk
Business enabling environment risks:
Regulatory risk
Crop substitution
Infrastructure risk
Political risk
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Risk Management Strategies
Risk Mitigation: Actions taken to eliminate or reduce events from
occurring, or reduce the severity of losses (e.g. water draining
infrastructure, crop diversification, extension, etc)
Risk Transfer : Actions that will transfer the risk to a willing third party, at
a cost. Financial transfer mechanisms will trigger compensation or reduce
the losses in the case of a risk generated loss (e.g., insurance, re-insurance,
financial hedging tools, etc.)
Risk Coping : Actions that will help cope with the losses caused by a risk
event (e.g. government assistance to farmers, debt re-structuring, etc.)
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Weather Data Digitization
PROBLEMS WITH WEATHER DATA
– Limited coverage of stations
– Missing data in the historical records
– Short historical record (e.g. recently installed stations)
– Quality issues
Partly due to backlog in digitizing
weather data
Weather digitization Projects
1.Training personnel in CLICOM
2.Data digitization
3.Data validation and storage
Mozambique
To digitize meteorological historical data of the 31
stations regarding the years 19792010 (3,695,478 observations).
Ghana
To digitize 5,990,000 weather observations,
comprising the period of 1981 to 2010, from 22
Synoptic and 99 Agroclimatic stations throughout
Ghana.
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WRSI for Crop Monitoring
1. Crops are vulnerable to weather risks
A crop, such as maize, is vulnerable to
rainfall deficit driven stress to different
extents at different stages of its
development process.
2. Weather data as a proxy for production
risks
Real time assessment of losses
in agriculture by observing
rainfall
3. Dollarizing rainfall
Knowing the price per
kg of a crop, we can
then transform mm of
rainfall in terms of
financial losses
Dollarizing
Rainfall for
Risk
Manageme
nt
-Monitor export losses
-Monitor food security
-Trigger index insurance
For timely
DESIGN OF RISK MANAGEMENT
MEASURES
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Weather Risk Mapping
for better planning and monitoring
Conceptual framework & Workflows
Map suitability index for 12 crops
• U
USES
• regional/zonal policy on crop vulnerability
• inform public and private investments in
agriculture
• land use planning
• design ag risk mitigation measures
• design ag. Insurance contracts
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Solving data problems – “synthetic weather”
PROBLEMS WITH WEATHER DATA
– Limited coverage of stations
– Missing data in the historical records
– Short historical record (e.g. recently installed stations)
– Quality issues
PRACTICAL SOLUTION: WEATHER DATA GRIDS
Gridded datasets generated with a successive correction method (Cressman, 1959) based
on two predictors:
 Primary: Meteorological stations
 Secondary: The North American Regional Reanalysis (NARR) FROM NOAA*
* Other satellite- observed data can be used for Africa.
BENEFITS
 Integration of all existing data in a given day (i.e. partial missing records do not
restrict the analysis of meteorological stations)
 Complete historical records for all the pixels within the domain
 Simplified association of meteorological fields with spatial features (e.g. assets,
political boundaries, topography, land use, etc.)
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Training on Weather Index Insurance
http://www.agrisktraining.com
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Thank You
www.worldbank.org/agrm
www.agriskmanagementforum.org
www.agrisktraining.org
Carlos Arce
Agricultural Risk
Management Team
World Bank
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