Fig. 2: Schematic overview of the strategic risk management options.

Regional decision-makers need to address the reliability of food production under different sources of uncertainty. Annual crop yield variations due to weather events cannot reliably be predicted, crop yield improvements and reductions due to technological change and climate change are uncertain, and population trends are also subject to high degrees of uncertainty (Left). Sources of deep uncertainty (population growth and long-term yield trends) are included by means of scenarios, while uncertainties that can be estimated based on data (crop yield variations due to weather) are incorporated through their corresponding probability distributions. In order to cope with these layers of uncertainty, decision-makers can select from a set of strategies according to their preferences (Center). The risk-neutral strategy uses the best estimate of crop yields to ensure that the expected food production meets the regional demand. The risk-target strategy allows the decision-maker to set a reliability target for food production, at the expense of higher cultivation costs. The risk-sharing strategies use risk pooling across regions to reduce the exposure to covariate risk within the regions. In the risk-sharing strategies, cultivation costs and the reliability of food production are considered at the collective scale. Progressively introducing food security reliability targets and cooperation into the modeling framework allows us to evaluate the differential impact of these strategy options both on the reliability of food production and on the fiscal sustainability of the contingency fund (Right).