Optimizing early action and risk-financing opportunities: Evidence from WFP’s participation in the ARC Replica Initiative (March 2024)

Climate and Disaster Risk Financing and Insurance (CDRFI) provides a systematic and robust approach to managing risk and financing earlier humanitarian responses after communities are impacted by climate shocks. By prearranging financing triggered by pre-identified risk parameters, resources can be made available earlier than usual to provide humanitarian assistance, enabling early action or timely response that limit the impact of a crisis. Since 2018, the United Nations World Food Programme (WFP) has been an Africa Risk Capacity (ARC)1 Replica Partner and has purchased insurance policies in Burkina Faso, Mali, Mauritania, The Gambia, Madagascar, Mozambique, Sudan, Zambia and Zimbabwe, increasing the number of people protected against catastrophic droughts and tropical cyclones. This document summarizes Tetra Tech’s assessment of the financial and operational efficiency of the ARC Replica initiative, including the impact of early action, use of insurance and financing predictability.

RESPONDING EARLIER ENABLES GREATER FINANCIAL EFFICIENCY AND IMPACT

The assessment has confirmed that taking early action to prevent deterioration of food security is deemed crucial for ARC Replica country teams and partners. Providing food and nutritional assistance (through cash transfers where possible) using ARC Replica payouts closer to the time of the failed harvest could enable the purchase of food at a reduced cost and minize food insecurity. For example, a quantitative case study conducted in Mali examined the costs of essential staple foods like maize, millet and rice. The study revealed that enabling communities to purchase essential food items earlier in the year with cash support could save up to 10-20 percent of their costs, with the most significant savings in drought years. Moreover, it prevents foregone consumption and distress coping mechanisms that may have longer-term effects and result in more costly assistance needs down the line.