1.1 Conceptual Framework of the Study The word ‘risk’ came from the Italian word ‘risicare’, which means ‘to dare’. The notion of risk relates to the Greek navigation term ‘rhizikon’, describing the need to avoid ‘difficulties on the sea’. Risk is completely associated with uncertainty and damage. Symbolically, it can be present as:
Risk = Uncertainty + Damage.
Risk can be defined as the probability of loss; it depends on vulnerability, hazard and exposure [8]. “Risk (i.e. ‘total risk’) means the expected number of lives lost, persons injured, damage to property and disruption of economic activity due to a particular natural phenomenon, and consequently the product of specific risk and elements at risk”. Total risk can be measured as:
Risk (total) = Hazard (Elements at Risk) +Vulnerability.
Risk and vulnerability are related to each other. Vulnerability is the plight of a commodity, system or asset that makes it susceptible to damage in the face of a hazard. Hazard on the other hand, is an unavoidable event that brings dangers. Vulnerability may arise from various sources including physical or socio-economic, and/or environmental factors, for example, poor design, inadequate protection facilities, lack of awareness etc. According to Downing et al. vulnerability is the different exposure of stresses experienced by an exposure unit. Risky events can be characterized by their degree, the scope, rate, duration and the history, all of which originated form vulnerability. Kirilenko et al. and Soussan & Arriens expressed the mathematical relationship among the risk (R), vulnerability (V), and hazard (H), which is as follows:
R = f (H, V). [f indicated a function]
Thus, risks can be explained by the probability of occurrence and the severity of its consequences on a farm. It is possible to calculate risks of a farm by the likelihood of risk, risk exposure and the severity of risky events. Researchers and practitioners have been examining the extent of risk by identifying a set of key factors: inherent commodity characteristics, inherent production characteristics, political boundaries, and infrastructure conditions. A farmer may be vulnerable to certain events which may not be risky to him or may be less vulnerable but loss may be catastrophic.
Baquet et al. identified five separate risks in agriculture e.g. production risk, marketing risk, credit risk, personal risk, and environmental risk. Later, Hardaker et al. added political and business risks in that list. Hazell & Norton [16] reported that the types of risks depend on the types of farming system, climate, policy and the institutional environment.
In general, the agriculture sector is affected by five major risks e.g. production, financial, marketing, institutional and personal risks. In this paper, the researchers reviewed diverse agricultural risks in Bangladesh and their management process along with some effective management strategies.
1.2 Role of State Agricultural Extension and Advisory Services in Addressing the Agricultural Risk in Bangladesh
Globally, in combating hunger, the need for quality extension services has now been widely recognized. Evaluating 294 studies of the world, International Food Policy Research Institute (IFPRI) found that the rate of return on extension investments was 79 percent (Alston et al. 1999 in Swanson. Haq, in a Bangladeshi study, found that extension contact has a positive significant contribution in improving farm income. Uddin found that extension visit has significant effect in reducing ranges of farm vulnerabilities. Although, South Asian Agricultural Extension Services of late 1990s became weak due to reduced budget, it again valued essential during the world food crisis of 2008. After the Washington Consensus, various private funding and delivery arrangements were also made in reducing the agricultural risk (Rivera and Carry (1997) in Uddin. As an agricultural country, the Government of Bangladesh has sufficient policy focus and strong interest in combating the risk. Ideally, the State agricultural extension and advisory systems of an agrarian country should be like the national fire brigade. Moreover, agricultural extension is considered as a pillar of research and development.
2. THE RISKS In comparison with other livelihoods, the extent of risk in agriculture is very high. The agricultural production process is exposed with high probability to many dangerous natural disasters and the number of risks is increasing day-by-day. Along with natural risks, a lot of man-made risks are imperiling the livelihoods of farmers in rural Bangladesh. Here we reviewed risks associated with the agriculture sector of Bangladesh and their consequences. We further consider the risk management process and strategies.
2.2 Financial/Credit risks Agricultural production is a function of inputs application. Inputs, on the other hand, involve cost. Farouque & Takeya found that ‘financial inability to buy fertilizers in time’ brings risk of uncertain yield. Agricultural financing has a significant positive relationship with the economic growth of a country. During seed sowing period, if farmers do not have enough resources to buy seeds, both quantity and quality of yields will fall drastically. Generally, crop price goes up during early harvesting time and therefore late harvesting is less profitable. Therefore, delay in crop cultivation may bring a risk of unprofitability. Financial risks may affect the entire cropping system, if financial institutions are unable to provide adequate loans to farmers. Crop loan allocation in Bangladesh is unnecessarily lengthy. On the contrary, timely planting increases crop yields. In the case of maize, yield may increase up to 11-19 per cent if planted timely. Early planting also reduces the costs of cultivation, conserves soil moisture, and reduces erosion losses.
2.3 Price/Market Risks Farmers of Bangladesh are always under pressure to offer a low price for their products. The gap between farmers’ selling price and consumers’ purchasing price is very high in Bangladesh. Poor farmers growing crops which are only sellable at a particular time of the year have an especially difficult life. In a particular season, a particular crop floods the market: the market price may drop below cost of production and the farmer will lose his investment. On the other hand, farmers need to repay credit immediately after harvesting. Otherwise; they have to pay more interest for each day. Those who cannot do so sell their yields at a low price and repay the credit at 1.5 or 2 times of the loan amount which is locally called ‘dera shud’ – 150% interests - and ‘duna shud’ – double repayment - respectively [40]. Of course, such farmers become, and remain, poor.