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Risk management tools to mitigate effects of El Niño and La Niña

By Michael F. Rellosa

The Philippines is situated on the western fringes of the Pacific Ocean and is therefore subject to the twin phenomenon of El Niño followed by the La Niña events, together known as the El Niño Southern Oscillation Cycle (ENSO). El Niño results from the warming of the central and eastern Pacific regions, affecting air and sea currents. This, in turn, causes dry spells, droughts, and other adverse environmental effects in the country. Conversely, La Niña means the cooling of the same regions of the Pacific Ocean, resulting in frequent and intense typhoons, subjecting the Philippines to floods, landslides and other detrimental effects.

We currently find ourselves at the tail end of a particularly bad El Niño where, as of the end of March 2024, Pagasa reports that 37 provinces are experiencing drought conditions characterized by three consecutive months of below-normal rainfall with a more than 60 percent reduction from the norm. There are also 22 provinces that are experiencing dry spells where there have been three months of below-average rainfall with a 21-60 percent reduction from the norm. Finally, there are 12 provinces with a dry condition, meaning they have had at least two consecutive months of below-normal rainfall.

Currently, there are about 29,400 affected farmers, with 18,000 from Region 6, 6,300 from Region 2, 2,600 from Region 4B, 2,000 from Region 1, 400 from Region 4A, and 22 from Region 9. This translates to 32,200 hectares of croplands destroyed or 44,800 metric tons lost. The majority of these are rice (64 percent), followed by corn (18 percent) and other high-value crops, i.e., vegetables, coffee and cacao, among others (18 percent). In monetary terms, this is a loss of $31.2 million or P1.76 billion. It's huge, especially if you factor in our food security and the fact that we are actually net importers of our grains and other foodstuffs.

The Department of Agriculture has estimated that the ongoing El Niño will persist through May. It is then expected to gradually transition through June of this year, where an ENSO-neutral period is expected to kick in (neither El Niño nor La Niña will be felt during this transition). Pagasa estimates a shift to La Niña with a high percentage of probability, and as you know, this brings with it frequent and stronger typhoons.

How are we supposed to handle such gigantic risks that we perennially face? A risk manager would immediately offer a suite of risk management methods such as the planting of submergence-tolerant rice varieties like NSIC Rc194 (Submarino) or PSB Rc68 (Sacobia) in areas prone to floods; the adjustment of the time of planting where flowering, grain filling and harvesting do not coincide with times of heavy rainfall or winds; the proactive repair of dikes, drainage and irrigation canals; the draining of excess water from rice fields before and after heavy rains; the usage of windbreaker structures to protect crops from strong winds, i.e., rows of tall, sturdy plants along bunds; the use of mechanical driers; the practice of rainwater harvesting using small farm reservoirs; and last but not least, the adoption of risk transfer mechanisms, otherwise known as insurance. There are insurance products, both traditional and novel (parametric), that cover against excess rainfall and/or drought, both offered by the state-owned Philippine Crop Insurance Corp. and increasingly by private sector insurers who are currently getting their feet wet in this area and gaining experience in the underwriting and claims servicing of this sector.

Thus far, we have talked about crops and wet conditions; what about the dry conditions El Niño brings? We battle rising temperatures and the adverse effects that they bring through another suite of risk management efforts that include but are not limited to structural heat insulation, making homes and workplaces impervious to heat, using natural cooling methods such as the incorporation of plants to provide shade, reduce heat absorption and improve air quality. Achieving proper ventilation via traditional architectural techniques such as elevated structures, high ceilings and wide windows with deep eaves, all of which contribute to a cooler, more comfortable and healthier condition for the building occupants. Again, risk transfer or insurance for heat-induced risks such as sickness as well as fires that happen frequently during the dry season.

Water shortages also call for its own suite of risk management tools, such as rainwater harvesting, water-saving techniques and alternative water sources. Relatedly, it is important to prevent fires and ensure safety calls for using fire-resistant landscaping, safe cooking practices and emergency preparedness.

Meanwhile, bracing for typhoons and extreme weather means the use of reinforcing homes or retrofitting homes to better withstand the effects of a typhoon and the incorporation of natural barriers. Finally, insurance comes in as a final tool to round off the various tools already mentioned. When all else fails, you can be certain that you can always rebuild your home or replant your crops in the event of any peril that you may be exposed to.

The idea of being aware of the risks and knowing that there are many ways of handling such risks, with insurance as the anchor, is the way to go for us here in the Philippines, which is now known as the most vulnerable country in the world to natural catastrophic (Nat Cat) events.


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