insecurity so that food insecurity costs can be assessed. The three concepts for assessing food insecurity and the response cost are described below.

## **Box 1. Africa RiskView: Introduction**<sup>**29**</sup>

The first step to establishing a facility such as ARC is understanding — in dollar terms — Africa's drought‐related food security risk. As the technical engine of the ARC risk pool, _Africa RiskView_ (ARV) is a core product of the ARC Agency. It combines existing operational rainfall‐based early warning models on agricultural drought in Africa with data on vulnerable populations to form a standardized approach for estimating food insecurity response costs across the continent — information that is critical for financial preparedness for drought and for providing the basic infrastructure needed to establish and manage a parametric risk pool and trigger early disbursements.

In addition to supporting ARC, ARV provides decision‐makers with expected and probable maximum costs of drought‐related responses before an agricultural season begins and as the season progresses for every first‐level administrative district in every country in Sub‐ <u>Saharan Africa. In addition to providing a financial early warning tool, identifying and quantifying risk in this objective way can also help</u> countries and their partners direct appropriate drought response actions and target food security investments. ARV is designed to interpret different types of weather data, such as rainfall estimates, and information about crops, such as soil and cropping calendars. These data are then converted into meaningful indicators for agricultural production and pasture and applied to the vulnerable populations that depend on rainfall for crops and rangeland for their livelihoods. ARV then uses this information to estimate how many people may be directly affected (or have been affected) by drought or deficit rainfall in a given season. Using cost per affected person estimates (see _Methodology_<sup>_30_</sup> ), ARV estimates how much response costs to the observed drought event may be. Population affected and response cost estimates can be calculated for the African continent, a region, a specific country or part of a country. Users can customize all aspects of the underlying ARV. Countries can also use the tool to select ARC risk transfer parameters to define how much of this modeled drought risk they wish to transfer to the ARC risk pool for each season. See the _How ARC Works_<sup>_31_</sup> to read more about how these participation parameters are defined.

In addition to supporting ARC, the information produced by ARV has broader applications. It could help to target early food security assessments in specific geographic areas or help with contingency planning and emergency preparedness for future shocks in a country. The tool could also be helpful in guiding planning and investment decisions aimed at enhancing agricultural productivity or market development. To date the tool focuses on drought, but work is ongoing to include flood risk. ARV is a product that will be offered to countries working with the ARC Agency. It has been designed to be adapted and customized to work within national frameworks, strengthening existing systems and allowing governments and their partners to carry out their own risk analyses, as well as define their own risk management strategy and risk pool participation.

# Identification of the Vulnerable Group

ARV considers farming households living in the area affected by the drought with household income at or below the country’s poverty line as the vulnerable group.

Reduction in Household Income from Production Shocks The impact of drought on agricultural income is described by categorizing the intensity of the drought as low, medium and severe. For each of these three drought intensities a percentage drop in the agricultural income is specified. The percentage drop in the agricultural income times the percentage of household income from agriculture (obtained as for instance from household survey data) is used to calculate the percentage reduction in the household income arising from drought.

Threshold Value of Household Income Drop for Defining Food Insecurity A threshold level of household income drop is defined such that if the percentage drop in household income (calculated above) is equal to or greater than the threshold value then the household is considered to be food insecure.

Response Cost

> 29 Available at <u>http://www.africanriskcapacity.org/africa‐risk‐view/introduction.</u>

> 30 Available at <u>http://www.africanriskcapacity.org/africa‐risk‐view/methodology.</u>

> 31 Available at <u>http://www.africanriskcapacity.org/about/how‐arc‐works.</u>

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