Annex A. Questionnaire on Resilience for Agricultural Risk Management

Some significant sources of risk and uncertainty are increasing for the agricultural sector, and the financial impacts of adverse events is rising. Consequently, there is a need for farmers – and the agricultural sector more broadly – to become more resilient. Resilience can be understood as “the ability to prepare and plan for, absorb, recover from, and more successfully adapt and transform in response to adverse events”, which in agriculture can include market volatility, more variable weather conditions under climate change, pest and disease outbreaks, natural disasters, and even events external to the agricultural sector, such as pandemics. Resilient farmers and systems are able to absorb the impact of such adverse events (including mitigating or preventing impacts), adapt to an evolving risk landscape, and transform the type of farming system – or even the agricultural sector itself – if the current system is no longer able to adapt to or recover from shocks.

A resilience approach to agricultural risk management means putting greater emphasis on what can be done ex ante to reduce risk exposure and increase preparedness, so that farmers recover more easily from adverse events and are less exposed to such risks going forward. It also encourages policy-makers to consider systems instead of individuals, recognising that the actions of individuals can have negative consequences for the wider agricultural sector due to linkages and knock-on effects. This questionnaire explores the extent to which countries are integrating resilience into their agricultural risk management policies by examining country approaches and policy responses in the five critical resilience focus areas: time frame, trade-offs, investments in on-farm resilience capacity, no-regret policies, and participatory collaborative approaches.

Key questions on time frame

The first step in integrating the concept of resilience into agricultural risk management policies is to consider the risk landscape over the long-term, including unknown future risks, and to place a greater emphasis on ex ante and preventative measures. The following questions explore the extent to which agricultural risk management policies take a long-term perspective, plan for a range of scenarios, and achieve an appropriate balance between ex ante measures and ex post assistance. Specifically, the answers to the questions on this area will cover:

• The extent to which governments incorporate a long-term view in their policy development and planning processes.

• The relative emphasis placed on ex ante policies, investments and planning processes versus ex post assistance.

• How information on risks is shared and communicated among stakeholders.

Questions

1. 1. How often do governments re-assess the main risks to the agricultural sector and the role of government in responding to those risks (if any)? How are these assessments carried out, and over what time horizon? What impacts are taken into account in these assessments (e.g. only direct losses, or also indirect losses)?

2. 2. Are foresighting exercises (e.g. horizon scanning, scenario analysis, and sector outlook) carried out for the agricultural sector? If so,

   1. a. By whom (government agencies, regional governments, industry organisations)?

   2. b. With what frequency, scope, and time horizon?

   3. c. Do these exercises consider climate change projections?

   4. d. How are these exercises used in developing and revising policies?

   5. e. Is there any evidence that these exercises help to drive decision-making in the long-term by public and private stakeholders in the sector?

3. 3. How do government agencies inform stakeholders about current and potential future risks (including frequency of occurrence and likely impacts)?

4. 4. What type of ex ante tools and strategies are in use? Is there evidence to show which policies are most effective at reducing the impact of adverse events?

5. 5. On a scale of 1 to 10, how important are ex ante tools and strategies that reduce risk exposure (such as improved farm-level management or investments in infrastructure or knowledge systems) in the overall risk management policy framework (compared with ex post assistance in the form of ad hoc payments)? Is the relative emphasis on ex post assistance in the form of ad hoc payments increasing or decreasing?

6. 6. Have analyses been conducted on the extent to which ex ante tools and strategies can remove the need for ad hoc ex post measures in response to adverse events affecting your country’s agricultural sector? If so, what recommendations can be drawn from this analysis with respect to policy measures or risk management strategies?

7. 7. Are disaster response and disaster risk reduction plans for the agricultural sector carried out independently, or are these plans integrated into broader national disaster frameworks and climate change adaptation plans? At what level of government are policies and plans on resilience and disaster response formulated: local/municipality, state/territory/province, regional, and/or national?

Key questions on trade-offs

A holistic policy framework for strengthening resilience to risks needs to take into account how policies build resilience to a range of current shocks and future risks, while also strengthening the resilience of farmers, the sector more broadly, and other actors in the value chain. Ex post assistance to current shocks and disasters may accelerate recovery, but it does not create incentives to increase preparedness for future risks, and may create an adverse selection problem by incentivising under-preparedness for future risks. Given budget and institutional constraints, agricultural risk management policies will involve trade-offs between these outcomes. The following questions explore the extent to which these trade-offs are taken into account, and the process for doing so, in developing agricultural risk management policies. The answers to the questions under this area will cover:

• How the policy development process takes into account the effects of current assistance, and risk management policies and tools on future resilience, while facilitating structural change.

• Which stakeholders are considered in the agricultural risk management policy development process.

• Whether risks are assessed individually or holistically, by accounting for correlations and comparisons of frequency and impact.

• The relative emphasis placed on ensuring that the sector can absorb the impact of risk, incrementally adapt to a changing risk environment, or transform when ecological, economic or social structures make the existing system untenable.

• The extent to which current risk management policies allow for flexibility in producer decision-making – for example, by facilitating adaptation and transformation in response to risk, and avoiding systems that “lock-in” production of a certain commodity or entrench a given production system.

Questions

1. 1. Are public budgets for disaster response and ex ante preventative measures co-ordinated (e.g. are investments in disaster prevention planned with a view to reduce spending on disaster relief), or are the two activities funded under independent, non-related mechanisms? Are there any efforts to link the two in order to reduce disaster exposure and vulnerability?

2. 2. To what extent is there a trade-off between investments in general services that support improved risk management (such as education and knowledge generation) and risk management policies targeting farmers, whether ex ante or ex post?

3. 3. Do disaster relief and market-based risk management policies target specific activities or investments (for example, subsidised crop insurance that covers some commodities, but not others; or tied grants such as subsidies for freight or fodder, or for the restoration of particular assets)? Are there risk management tools that are specific to certain types of events?

4. 4. Are policy impacts or spillovers on other stakeholders known (including on other actors in the agriculture value chain, related industries, and other sectors)? Are they taken into account during risk management policy development? If so, how, and for whom? How is the priority decision-maker identified in these cases?

5. 5. Is there evidence that the agricultural sector is transforming towards more resilient systems? If so, what is driving this transformation (e.g. technical change, changes in market structure, improved information and research capacities, or a need to respond to a particular climate risk or resource constraint)? How is policy facilitating or impeding this transformation?

Key questions on investing in farm resilience capacity

Although policies and programmes can provide risk management options for catastrophic situations, farmers can also pursue strategies that will reduce their exposure to all levels of risk, both now and in the future. However, producers must first be exposed to the proper market signals or incentives to pursue this behaviour, and second, have the capacity to act on opportunities to do so. The answers to the questions under this area will cover:

• Whether or not market signals provide stakeholders with incentives to reduce their risk exposure.

• The extent to which the conditions for ex post assistance are defined in advance, and that stakeholders receive consistent signals about their responsibilities for managing risks.

• Whether risk management policies take into account changing farmer demographics.

• The importance of financial safety nets for crisis periods.

Questions

1. 1. Does the overall risk management framework include policies (or provisions of policies) that incentivise on-farm investments to reduce risk exposure and improve long-term sustainability? If so, can you provide some examples?

2. 2. What types of thresholds are in place for the various types of risks? In particular for catastrophic risk, how are such thresholds measured or identified? Do they apply to the overall agricultural sector, or are considerations given to certain subsectors?

3. 3. Are the thresholds for when governments will respond in disaster situations explicit, such that producers can make farm management decisions with a clear understanding of where the boundaries between normal, marketable, and catastrophic risk layers lie? How are these thresholds communicated to farmers? Has ex post disaster assistance in recent years reflected these thresholds?

4. 4. Are farmers supported or incentivised to engage in experimentation to adapt their operations to changing circumstances, in particular climate change? If so, how?

5. 5. Do risk management programmes take into account the potentially contrasting needs of beginning versus experienced farmers?

6. 6. Are there tax or other savings instruments designed to help producers maintain or improve stability of financial reserves for short-term crises? What are the rules governing the use of these instruments (for example, in response to normal versus catastrophic circumstances)?

7. 7. Can farmers access economy-wide social assistance programmes that respond to personal financial difficulties?

8. 8. Are current programmes assessed for their impacts on crowding out on-farm risk management strategies, such as diversification or purchase of insurance?

9. 9. Is the availability of credit from the private market influenced by whether or not producers use government risk management programmes?

Key questions on no-regret policies

No regret policies are policies and investments in key capacities that build agricultural sector resilience to risk under a wide range of future scenarios and contribute to agricultural productivity and sustainability, which are of benefit even in the absence of a shock. Public investments in key sectoral capacities, including research and development, information, and appropriate investments in hard and soft infrastructure may support the capacities of farmers to absorb the impacts of normal and marketable risks, and adapt or transform in response to a changing risk environment (particularly due to climate change). The following issues will be covered by the answers to the questions in this area:

• How the agricultural innovation system contributes to resilience objectives.

• How real-time information on developing risks is generated, shared and communicated.

• How the wider enabling environment – including the maintenance of strong and effective institutions, adequate provision of public goods, and good governance through laws and regulations that are conducive to private-sector economic activity while addressing market failures – affects the capacity of different stakeholders to manage risks to their assets.

Questions

1. 1. Are national or regional agricultural innovation systems undertaking research on risk management and resilience topics, with a focus on risks for the medium- (e.g. within the coming decade) and long-term (e.g. beyond ten years)? Are there any examples to highlight?

2. 2. Are extension programmes being leveraged to deliver outreach and education to farmers on best risk management practices and new developments in risk management?

3. 3. Are there initiatives outside of extension (including through the private sector) that target improving farmers’ knowledge of risk management?

4. 4. Are early warning systems in place to inform producers about developing risks? For what risks? Are there plans to update these systems or improve their coverage to additional risks?

5. 5. Are major investments in infrastructure that is critical to the sector planned with a view toward improved resilience under potential future conditions?

Key questions on process

Gaps in resilience levels may be due to stakeholders lacking: awareness about risks; knowledge about what measures exist to increase resilience; and the boundaries between normal business risks (to be borne and managed by farmers), larger risks requiring market solutions (such as insurance systems and futures markets), and catastrophic risks potentially requiring public response. Moreover, as the risk landscape is shifting, risk responses relative to these boundaries may need to be periodically re-assessed in a collective process that considers the viewpoints and incentives of all stakeholders. The answers to the questions in this area will cover:

• Whether participatory mechanisms are in place for setting the boundaries between different risk layers and the responsibilities of different stakeholders in managing risk.

• Consider how often evaluations, reassessments, and policy/strategy redesign take place.

Questions

1. 1. Are agricultural risk management policies developed in conjunction with farmers, industry groups, and other stakeholders? If so,

   1. a. Which stakeholders participate in/contribute to designing risk response measures?

   2. b. What does their participation or contribution entail? At what stages are they involved (planning, foresighting, assessment, implementation, financing)?

   3. c. Do stakeholders participate in the process to identify the risk layers, establish risk ownership, and define relative responsibilities?

2. 2. What are the evaluation mechanisms currently in place for targeted risk management policies? How often are outcomes evaluated and policy responses reassessed? Are climate change projections and uncertainties considered in this assessment process?