2.3.2. Formal mechanisms: Formal risk management mechanisms can be classified as publicly provided or market based (Table. Government action plays an important role in agricultural risk management both ex ante and ex post. Ex ante education and services provided by agricultural extension help familiarize producers with the consequences of risk and help them adopt strategies to deal with risk. Supply of quality agricultural inputs is another institutional strategy. Governments also reduce the impacts of risk by developing relevant infrastructure and by adopting social schemes and cash transfers for relief aftershocks have occurred As mentioned earlier. production and market risks probably have the largest impact on agricultural producers. Various market-based risk management solutions have been developed in order to address these sources of risk.
