In order to minimize basis risk – the technical term used to describe the potential mismatch between ARC payouts and country needs – the Secretariat engages each potential participating country and its in-country partners in a year-long process to customize Africa RiskView to the respective national context, using local expert knowledge and information to adjust settings and assess the model’s performance and ability to capture the impact of drought events on vulnerable populations. The whole process will be carried out by national Technical Working Groups, and supported by the Secretariat.
Given the complex nature of food security in sub-Saharan Africa, there is chance that ARC payouts will not come in years in which the food need is high should the main drivers of that food insecurity not be drought-related. One of the objectives of the year-long Africa RIskView customization process is for countries to better determine to what extent exogenous factors like drought are the predominant risk factor in their country and thus if participation in ARC will bring potential efficiency gains. The ARC team is confident that basis risk can and will be addressed as thoroughly and accurately as possible through Africa RIskView customization and through open discussions on alternative risk management strategies and investments more appropriate to manage other risks.
The ARC Technical Working Group will perform the customization by adjusting settings and testing new settings by comparing the corresponding Africa RIskView outputs against available quantitative and qualitative datasets to define an improved set of parameters that lead to Africa RIskView results which perform well across a range of metrics to be defined by the ARC Technical Working Group. At the country level many datasets that describe past drought events exist. These include:
- Quantitative datasets, such as yield data, statistics published by regular food security or needs assessments or data on historical operations and beneficiaries assisted by government and its partners; and,
- Qualitative data, using the knowledge base of the highly qualified ARC Technical Working Group of past drought events and other food security emergencies which can serve as a practical balance to purely numerical datasets.
Given the range of available data on past crises, the ARC Technical Working Group has many ways to build a robust historical dataset of drought-related impact and need in the country and therefore a baseline against which to compare Africa RIskView outputs and justify its customization choices. In addition to allowing countries and their partners to review the efficacy of Africa RiskView for their risk management needs, this process will also ensure stakeholders to understand how the model works – its inputs and its limitations – and how it can be used as the basis for triggering early payouts when required in severe drought emergencies – the core objective of Africa RIskView.