Why Ag Finance Needs Map Data Visualization for Risk Mitigation
Agricultural risk is inseparable from climate risk. As the climate continues to change with average temperatures increasing, more volatile swings in weather and more prolonged stress periods are set to define how growers and investors plan for the future. These scenarios aren’t a distant possibility, but a present reality.
The American West may very well be entering its next megadrought. As of August 2021, 37.3 million people were directly affected by drought in California alone, with 26 counties under USDA disaster designations. With the severity of drought likely to increase, it is imperative for ag professionals to quickly identify and effectively mitigate their most sensitive exposures to climate and water risk.
With data acclimation at its core, map data visualization can be a supremely valuable tool. Organizing information for maximum accuracy and clarity, maps offer an elegant solution to the challenges of big data and can help finance professionals make sense of their portfolios.
Indeed, interactive maps that take advantage of accurate, granular data have the power to turbocharge risk analysis and direct the complex process of targeted risk mitigation.
This article will examine why maps are such powerful tools of data visualization, how they can be deployed in ag finance, and what role they play in developing mitigation strategies.
The Power of Map Data Visualization
Map data visualization is important. As eloquently put by Jeopardy! champion Ken Jennings in his NYT bestselling book Maphead:
“There must be something innate about maps, about this one specific way of picturing our world and our relation to it, that charms us, calls to us, won’t let us look anywhere else in the room if there’s a map on the wall.”
Poetic language aside, Jennings’ observation that maps offer a uniquely captivating way of presenting data is well-founded. Maps can display a vast amount of complex information in a relatively small space without overwhelming the viewer. More often than not, maps elevate the most important features from a dataset without hiding the rest away.
For this reason, maps are powerful tools of data analysis. They can communicate key insights and foundational relationships with just a glance, but also allow analysts to explore and experiment for hours as they examine increasingly specific contexts.
Maps are intuitive. They present information in a form that is easily digestible and mutually intelligible. Location-based context for data that can be made sense of by loan officers, appraisers, risk professionals, and farmers alike makes a map worth a thousand email exchanges.
Their accessibility, however, doesn’t need to come at the cost of displayed complexity. Maps are likewise powerful because they can display lots of information at once.
This balance can be best seen in interactive maps with dynamic layers. For example, superimposing climate risk data on financial data produces a map of climate-induced financial risk. While simultaneously making sense of data on parcel valuation, groundwater depth, GSA policies, crop type, and active wildfires would be near impossible in any other medium, interactive maps rise to the occasion. With the ability to turn specific layers on and off, finance professionals can easily identify key relationships situated in a broad context.
Effectively implemented data mapping can be a powerful tool for responding to a changing climate. As explained by FEMA regarding its Risk Mapping, Assessment, and Planning (Risk MAP) program:
Although the frequency or severity of impacts cannot be changed, FEMA is working with federal, state, tribal, and local partners across the nation to identify flood risk and promote informed planning and development practices to help reduce that risk.
The same principles apply in the ag business.
Maps in Agricultural Risk
Mapping is particularly well suited for agricultural risk. The factors impacting the yield of a harvest or the value of a plot are hyper-local and geospatial, meaning they vary over time and space.
Weather patterns, water district lines, soil type, well-placement, and wildfire burns are all examples of considerations that impact agricultural risk and are inherently geospatial in nature. The relevant data only becomes useful when located in relation to specific parcels.
As noted on Drought.gov:
“The location, extent, and severity of drought impacts to agriculture depend on underlying social and ecosystem vulnerabilities, access to irrigation, types of crops grown, and other factors.”
The issues impacting the future of agriculture are location-specific and must be examined as such. Geospatial data becomes most accessible when displayed in a geographic medium. Map data visualizations, therefore, are excellent tools for decoding agricultural risk.
Maps empower ag finance professionals to examine how specific risk factors overlap in a given parcel. Instead of needing to look through a multi-page report to determine if a farm has access to groundwater through a well then needing to read through the latest SGMA updates to determine how groundwater use might be affected, a dynamic data map could communicate this info with just a glance and a click.
When managing risk across a diverse agricultural portfolio, it can be easy to become overwhelmed by the volume of data needed to make sense of the short and long-term risks. Utilizing map data visualization can save finance professionals time and money by allowing them to intuitively engage with risk data and spend more time unearthing hidden insights.
When integrated into a business intelligence operation, data maps can revolutionize responses to ag risk. Once points of exposure are highlighted, maps can likewise enhance the transformative process of mitigation.
The Road to Mitigation
Before risks can be effectively mitigated, they must be precisely identified. As explained above, map data visualization can empower rapid and detailed assessment of risk for a unique ag parcel. Given the wide range of mitigation options available, leveraging a precise understanding of which risks impact which parcels can empower ag finance professionals to identify the most effective strategies.
By comparing parcels through layers such as water rights, wildfires, groundwater, or soil quality, ag finance professionals can identify strategies for mitigation corresponding directly with potential liabilities at the parcel level.
The value of mapping for mitigation is well established. According to a 2015 World Bank report on weather mapping in agriculture,
“Weather risk mapping techniques aim at producing information that is useful for designing risk management strategies either for risk mitigation, risk transfer products, or for risk coping.”
Maps empower the de-risking process by making risk apparent and offering the context critical for selecting the mitigations strategies likely to be most successful. Smart business decisions are the source of long-term competitive advantage. Investing in data management and data visualization tools can turbocharge risk assessment and portfolio management.
The roadmap to resilience for ag finance is just that – a map. Previously opaque data can offer clarity, insight, and drive smarter decision-making in the hands of an analyst empowered by a dynamic mapping tool. By helping rapidly identify areas of risk and communicating key insights in an easily accessible format, maps are invaluable for organizations with a stake in the ag industry.
AQUAOSO’s products are purpose-built to help ag finance professionals understand and monitor their climate and water risk.
The GIS Connect platform allows users to integrate third-party data sets with their own data in a secure GIS data management platform. View loan, investment, supplier, and appraisal data in a single geospatial view. Integrate data with best-of-breed land and climate data through secure APIs. Manage board and regulatory requirements by pulling automated reports, through geospatial data management, as well as through information collection workflows.
PRESS RELEASE For Immediate Release AQUAOSO showcases GIS Connect, a climate intelligence platform that helps US financial institutions mitigate climate risk during the recent OnRamp Agriculture conference. AQUAOSO shares their story of substantial growth as...
In late 2021, world leaders gathered in Glasgow for COP26, better known as the UN’s climate change conference. With over 25,000 attendees meeting to discuss the efforts needed to address climate change, themes of sustainability, renewable energy and the reduction of...
With real-world impacts like rising global temperatures, climate change is one of the biggest risk factors agriculture faces today. NOAA reported that 2020 was the second warmest year and the EPA explains a consistent increase of 0.16°F in average surface temperature...