2.3. Risk Management Strategies:
In discussing how to design appropriate risk management policies, it is useful to understand strategies and mechanisms used by producers to deal with risk, and for the purpose of this discussion to distinguish between informal and formal risk management mechanisms and between ex ante and ex post strategies. As highlighted in the World Development Report (World Bank 2001), informal strategies are identified as
“arrangements that involve individuals or households or such groups as communities or villages while formal arrangements are “market-based activities and publicly provided mechanisms The ex ante or ex post classification focuses on the point in time in which the reaction to risk takes place prior to the occurrence of the potential harming event (ex ante) or after the event has occurred (ex post. Among the ex ante reactions, it can also be useful to highlight the differences between on-farm strategies and risk-sharing strategies.
Table 1 summarizes these classifications.
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