Rationale for the Design and Implementation of a project for the Small Coffee Producers Sub-sector Risk Management in Nicaragua: Investing in Data Collection - Information Exchange System for Risk Identification and Assessment in Small Coffee Farms.

1. Investing in Data Collection:
An Information Exchange System for
Risk Identification and Assessment
in Small Coffee Farms
(IES4RIA)
The Case of Young Entrepreneurs in
Coffee Farms of Northern Nicaragua

2. The Project
The project consists of the investing in the design and
implementation of an innovative Information Exchange
System for Risk Identification and Assessment in Small
Coffee Farms
• The IES4RIA will be based on a three years web-based
application piloting project running on accessible platforms
through cellular communications (App).
– The IES4RIA will aim at the implementation of a holistic Risk
Management processing model within the small coffee production
sub-sector
– The IES4RIA will target the stablishing of an Enterprise Risk
Management Framework model within the small coffee producer
sub-sector

3. Goals of the Project
Short Term
• To create an interactive system for collecting preliminary
data from cooperative or individual small coffee producers
that enables policy makers with the early identification and
assessment of risks through a holistic approach
Mid Term
• To provide decision makers the necessary inputs such as
baseline, cyclical and critical data to approach the identified
risks to come up with applicable alternative responses
(treatments tailored to the sub-sector)
Long Term
• To give back small coffee producers validated methods and
appropriate techniques to coping with risks through a
holistic approach to Enterprise Risk Management

4. The Problems
Small Coffee farms as the preponderant livelihood
• Small family farms is the predominant form of ownership in coffee farms
of the most productive zones for coffee plantations in Nicaragua
The business cycle and the side effects of commodity's low prices
• A significant amount of coffee producers are young farmers who
migrate to neighboring countries in search for incomes during the
less work intensive phase of coffee production
Inherent Industry Risks
• A severe cyclical drought and a harmful phytosanitary condition is long
affecting the coffee plantations in the coffee producing area of northern
Nicaragua

5. The Problems (Continued)
The subsector’s contribution ratio to GDP
• Coffee production amongst the agriculture sector in
Nicaragua is the single crop that contributes the most to the
GDP
Commodity Price Volatility
• The international market price of green coffee has dropped to
levels that threaten the survival and profitability of these
young entrepreneur business

6. The Needs
• The availability of tools and alternatives to young
producers for coping with financial and operational risks
during their seasonal job-driven migration and the
downside of the coffee business cycle as this activity
constitutes their main source of income.
• Addressing the consequences of coffee production
hazard risks and the prolonged harmful phytosanitary
condition that is affecting the coffee plantations in the
coffee producing areas of northern Nicaragua

7. The Needs (continued)
• The assurance of the survival and continuation of
traditional forms of ownership as they constitute
the main livelihood for thousands of families
within the most productive zones of coffee in
Nicaragua
• Keeping the level of relevance of the Coffee
production as sub-sector within agriculture in the
GDP (strategic risks)

8. The Needs (Continued)
The creation of an information exchange system that identifies
and assess the impact of positive and negative risks:
Hazard Risks
- Climate Conditions
(Drought, Floods)
- Phytosanitary conditions
of crops
- Operational Risks
- Production System &
Processes (plant diseases)
- Quality Control
- Strategic Risks
- Systemic Risks (Inflation,
GDP, employment
mobilization etc.
-
- Financial Risks
- Market Risks
- Local bank Interest rates
- Currency and Commodity
price volatility
- Liquidity
- Credit Risks
- Sub-sector specific credit
risk (Operational, Capital
loans)
- Solvency
- Price Risks
- High prices of inputs

9. Project Scope
• To design and deploy amongst risk beaten Small Coffee Producers
an interactive application that collects categorized information
with the purpose of identifying, assessing and responding to risks :
- Hazard risks: Climatic and Phytosanitary loss exposures
- Operational risks: Farm location, capacity, resources, yields,
Processes & Systems of production, Agricultural and
phytosanitary practices
- Financial & Strategic Risks: Price drop, systematic risks
• To invest from a diverse source of funding in the creation of a Sub-
sector Wide Enterprise Risk Management unit at a decision making
level that identifies and assess Risk from a holistic perspective

10. Project Scope
• To lay the foundations for the creation of a sub-
sector framework model that:
• Lead and establish accountability amongst producers
• Align and integrate the goals of the sub-sector with the national
development goals
• Define the allocation of resources required to manage the
framework
• Set the pathway for communication and reporting amongst
affiliates and non-affiliates

11. Funding Mix
• Since this initiative revolves around the development
of an inclusive innovation system within a struggling
industry in the Private Sector, the proposed funding mix
is a combination of the following sources:
– Cash and in-kind contributions from cooperatives and
associates
– Sub-national public and private domestic resources
• Local business partnerships (Banks, service providers)
• Public resource allocations from regional/national revenue agencies
– A concessional loan from a multilateral development bank
– Capacity building and technical assistance grants from Official
Development Assistance

12. • this initiative revolves around the development of an inclusive
innovation system within a struggling industry in the Private
Sector, the proposed funding mix is a combination of the
following sources:
– Cash and in-kind contributions from cooperatives and associates
– Sub-national public and private domestic resources
• Local business partnerships (Banks, service providers)
• Public resource allocations from regional/national revenue agencies
– A concessional loan from a multilateral development bank
– Capacity building and technical assistance grants from Official
Development Assistance
Funding Mix