Profit efficiency and catastrophic risk analysis of aquaculture in flood-prone

areas of Sylhet division.

1. Introduction
Aquaculture has emerged as a major source of food, nutrition, employment, and income for the rural
population, as well as a major tool to eradicate poverty. According to FAO, it refers to the farming of
aquatic organisms including fish, molluscs, crustaceans, and aquatic plants. Aquaculture production
around the world is increasing and reached an all-time high of 179 million tonnes in 2018 (FAO,
2022). The aquaculture sector accounts for 52% of the total fish food and Asia contributes almost
89% of the total aquaculture production (FAO, 2022). Where Bangladesh is the 3rd largest producer
of inland fisheries trailing China and India. An estimated 59.51 million people (full-time and part-
time) were engaged in aquaculture in 2018, where women contributed a significant amount of 14%.
Of all those engaged in primary production, most are in developing countries, and most are small-
scale, artisanal fishers and aquaculture workers (FAO, 2022). Thus aquaculture has great potential
for food security and fight against poverty, especially in the developing countries. In Bangladesh,
aquaculture sector's contribution to agricultural GDP is the second highest after the crop sector. It is
a major source of export earnings for Bangladesh (DoF, 2020). Despite all the promising facts, as this
sector is heavily dependent on the environment like other agriculture sectors, it encounters various
sources of risk and uncertainty. The risks and uncertainties faced by farm entrepreneurs vary across
production, marketing, financial, and institutional sectors among others (Galappaththi et al., 2020).
The sources of risk for the farmers also vary from place to place. For example, the risk in coastal
aquaculture is different from inland aquaculture. Also, due to climate change and extreme events,
farmers face various risks and uncertainty which cause a devastating impact on the farm production
(Adnan et al., 2020). Risk influences farmers not to undertake investments with high risk and higher
outcomes. Thus, risk perception and attitudes toward risk is a major factor in the decision-making
process of the farmers. These decisions eventually influence farm production and profitability (Adnan
et al., 2019). Therefore, it is important to understand how the farmers perceive risk in the aquaculture
sector of Bangladesh. Policymakers and researchers face a challenge in developing an effective risk
management system for farmers due to a dearth of knowledge regarding farmers' perceptions of and
attitudes toward risk. A deeper knowledge of farmers’ perceptions and attitudes toward risk is a
crucial factor in designing a more effective and advanced risk management framework. It will help
the policymakers to adopt effective policies for farmers’ to avoid losses caused by a variety of risks.

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2. Review of Literature

There are various studies about the risk perception and risk attitude of farmers in the aquaculture
sector. Monirul Alam (2019) studied the vulnerability of inland and coastal fisheries in Bangladesh.
He also studied the impact of climate variability on coastal Bangladesh. Md. Akhtarul Alam (2019)
examined the risk perception and management strategies in the coastal areas and Mymensing district.
Another study about the impact of climate change on freshwater aquaculture also carried out in
Mymensing by Nesar Ahmed in 2015. Besides, there are various studies carried out in the Sylhet
region but not specifically about risk in the aquaculture or fisheries sector. In case of east or south
Asia, most of the researchers choose Mekong region for their study due to its huge impact on the
livelihood of the countries in this region.

Risk is the likelihood of occurring an event of a particular magnitude. Risk is also considered from
different perspectives in agriculture. Sometimes, risk is described as an impact that has already
occurred and is quantified in terms of losses (Myers et al., 2017). Besides, risk is considered an
opportunity for gains where the probability of losses is weighted against the probability of gaining
(Weber & Hsee, 1998). On the other hand, generally, a catastrophic risk is a low-probability (rare)
event leading to major and typically irreversible losses with an adverse impact on business results
(Chichilnisky, 2000). There are various sources of risk in aquaculture such as economic, institutional,
and environmental. Among these environmental risks can cause major damage directly in the
production process. In the present world, climate change has been contributing vigorously to
environmental occurrences, and hence the impact it is creating.

Risk perception is a personal assessment of the likelihood of the occurrence of a particular kind of
uncertain event and its effects (Sjöberg et al., 2004). As a result, each person's perception of risk will
depend on both the likelihood that a loss will occur and its potential effects (MacCrimmon &
Wehrung, 1986; Ogurtsov et al., 2008). Risk perceptions can be influenced by combinations of
individual, relational, and situational factors (Sjöberg et al., 2004; Weber & Hsee, 1998). Individual
factors include education, knowledge, experience, etc. Level of education, knowledge about climate
change, and years of experience in farming may have different implications for individual risk
perception, depending on other factors. Relational factors, such as contracts, group membership, and
gender relations, are important to investigate, as it is known that social relations may amplify or
ameliorate risks (Luna et al., 2023). Lastly, situational factors contain climate and water resources

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which depend on the variability of locations. Risk and its sources might be different among coastal
regions, drought-prone regions, and other inland regions.

Risk attitude is the intentional response to uncertainty influenced by how a person perceives the
magnitude of an outcome. A range of possible attitudes can be adopted by the farmers in the same
situation resulting in different behaviors (Shivakoti, et al., 2015). The same uncertain situation will
exhibit different risk attitudes from different personnel depending on how they perceive it.
Additionally, as attitude determines behavior, individuals with different underlying risk attitudes will
react in various ways to the same scenario.

Risk influences farmers to be less inclined to engage in activities and investments that carry high risks
of failure but have higher expected outcomes. Besides, risk from various sources can hamper the
anticipated output from a farm and make it profit inefficient. Profit efficiency describes the distance
between the current profit of a farm and its optimal profit frontier. A profit efficient farm may better
withstand the risk than an inefficient farm. Nowadays, Climate variability and extreme weather events
have increased therefore creating an impact on agricultural and livestock output and additionally, the
income distribution and ultimately the security of livelihoods earned through farming. Therefore it's
necessary to predict the type of anticipated changes and comprehend how farmers perceive,
experience, and interpret climate change and its attendant threats (Ullah et al., 2015). Appropriate and
timely policymaking is conducive to appeasing the devastating impact of catastrophic risk.
Policymakers and researchers face a challenge in developing an effective risk management system
for farmers due to a dearth of knowledge regarding farmers' perceptions of and attitudes toward risk
(Adnan et al., 2020). A deeper knowledge of farmers’ perceptions and attitudes towards risk is a
crucial factor in designing a more effective and advanced risk management framework for farmers’
to avoid losses caused by a variety of risks.

There are major sources of catastrophic risk found by the researchers in different studies. The most
frequent include rapid changes in temperature, intense rainfall events, floods, frequency and duration
of cyclones, salinity intrusion, river erosion, fish price volatility, the quality of inputs, fish diseases,
and operating capital are the major issues to sustain the growth of aquaculture (Ahmed & Diana,
2016; Ahsan, 2011; Alam & Guttormsen, 2019; Amuzu et al., 2018; Aung et al., 2021; Bergfjord,
2009; Islam, 2013; Lebel et al., 2020; Monirul Islam et al., 2014; Ogurtsov et al., 2008; Engelhard et
al., 2022). In case of shrimp culture exposure of shrimp ponds to flooding and storm surges, and high
disease vulnerability was found by (Engelhard et al., 2022). The demographic factors that influence

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the risk perception significantly were found age, income, gender, farming experience, farm size, and
and ownership status (Lebel et al., 2016, 2020). Among the major adaptation strategies Crop
insurance was perceived as one of the most important risk management strategies (Aditto et al., 2012).
Besides, Barriers include technologically poor boats, inaccurate weather forecast, poor radio signal,
lack of access to credit, low incomes, underestimation of cyclone occurrence, coercion of fishermen
by the boat owners and captains, lack of education, skills and livelihood alternatives, unfavorable
credit schemes, lack of enforcement of fishing regulations and maritime laws, and lack of access to
fish markets (Aditto et al., 2012; Lebel et al., 2016; Monirul Islam et al., 2014; Amuzu et al., 2018;
Aung et al., 2021; Deb et al., 2021).

Therefore, the major sources of risk in aquaculture are mostly climate related. For being a delta,
Bangladesh has to bear the brunt of climate related issues frequently in near future which will have a
great impact on the agricultural sector. Though climate change is a global phenomenon, but the least
developed and developing countries are experiencing its devastating impact mostly. To weaken the
occurring of climatic events global efforts are necessary. But for appeasing the devastating impact on
the agricultural sector appropriate policy and planning are inevitable. Early warning, digging canals
and rivers, construction of embankment, etc. could be some impact mitigating measures in large scale.

3. Conclusion

Aquaculture is a great contributor to the economic development of Bangladesh. The three primary
sub-sectors of Bangladesh's fisheries industry are inland captured fisheries, inland aquaculture, and
marine fisheries. All these areas have different climatic events which are influencing the aquaculture
production. To develop an effective framework for managing climatic risk in aquaculture all these
areas needed to be studied vigorously. This study will look into the risk perception and risk attitudes
of aquaculture farmers in flood-prone areas of Sylhet division. The goal of this study is to identify
the major climate risks to aid in the design and prioritization of adaptation measures intended to
lessen, foresee, or mitigate the potential risks from climate change. It will help climate risk assessment
in aquaculture at a national scale to the developing aquaculture sector.

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