Financial Institution Risk Management Frameworks in Puerto Rico: A Critical Need for Agricultural Sector

Puerto Rico’s agricultural sector has been severely impacted by natural disasters over the past four years, resulting in significant decreases in farm income. The recent hurricanes Irma and María, earthquakes, and COVID-19 pandemic have made it clear that having a solid financial institution risk management framework is crucial to ensuring the resilience of the food system.

A Critical Need for Resilience

A recent study conducted by the University of Puerto Rico’s College of Agricultural Sciences, Department of Agricultural Economics and Plant Science, found that small farmers, ranchers, and fishermen are in dire need of a national agricultural plan centered on promoting food security and sovereignty. The study also highlighted the importance of decentralizing food production and distribution to make Puerto Rico more self-sufficient.

Barriers to Resilience

The research team, led by Dr. Robinson Rodríguez, conducted focus groups with diverse participants from Puerto Rico’s agricultural sector to identify the main barriers to resilience. According to the findings, small farmers agree that three major obstacles stand in the way of their recovery:

• The need for a national contingency plan
• Reforming aid programs to small farmers during crises
• Strengthening food production, access to technology, storage, and distribution chains

Impact on Financial Institutions and Policymakers

The study’s findings have significant implications for financial institutions and policymakers. The need for a comprehensive risk management framework is pressing, particularly in the context of Puerto Rico’s agricultural sector.

Proposed Solutions

The research team has proposed two activities to address these challenges:

• Managing Financial Risk: Developing skills in having up-to-date accounting information, reducing financial risks, and being prepared for future events.
• Natural Disaster Preparedness: Helping farmers develop skills to prepare for natural disasters, including emergency planning, evacuation procedures, and communication strategies.

Conclusion

The findings of this study are a wake-up call for policymakers and financial institutions to take immediate action to support Puerto Rico’s agricultural sector. It is imperative that they prioritize the development of a comprehensive risk management framework to ensure the resilience of the food system in the face of natural disasters.