Dit TransForum project richt zich op analyse van de onzekerheden en mogelijkheden van agroparken. Dit heeft geleid tot een risicomodel dat de kwalitatieve en/of kwantitatieve onzekerheden van een agropark project in kaart brengt. Daarmee kunnen maatregelen en managementstrategiën worden geïdentificeerd. Zo worden potentiële risico's omgezet in hanteerbare mogelijkheden

Ge, L.

English

Wageningen Yield 

  
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February 2011  1  
 
Evaluation “Risk analyses of agroparks” 
 
Period:   March 1, 2009- December 31, 2010 
Researcher/ 
projectpartners: Lan Ge (LEI Wageningen UR), Alterra Wageningen UR, F&BR Wageningen 
UR. 
    
1.  Introduction 
 
The concept of agroparks is one of the solutions to enhance a sustainable development of the 
agricultural sector. An agropark is ‘a cluster of agro-functions and related economic activities on or 
around a location’ (Smeets, 2010: 39). The last years have shown increasing interest in the 
development of agroparks, but also a stagnation of many agropark projects. One important 
obstacle for the actual development of agroparks has been the high uncertainty about the 
feasibility and profitability of an agropark.  
An agroparks consists of complex interaction of individual firms. Each firm has its own objectives, 
responsibilities, uncertainties and considerations. The agropark itself is also accompanied by a 
multitude of uncertainties concerning technological, market and institutional developments in the 
future. These uncertainties present risks to the agropark as integral design and to the stakeholders 
of the agropark as individual actor. Lack of insights in the risks and opportunities are an obstacle in 
decision-making of stakeholders, which makes firms reluctant to invest or participate in agroparks.  
This research focuses on the analysis of uncertainties and the possibilities to transform them into 
manageable risks. With that, one of the obstacles to realize agroparks may be tackled. 
 
2.  The project 
 
2.1  Aim 
The aim of this project is to systematically identify and analyze risks of agroparks. This will result in 
a generic framework that can be used to quantify financial and economic risks of agroparks, and a 
risk model that can be applied to agroparks being developed or to be developed. 
 
  
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2.2  Approach 
The research used a combination of desk studies and field studies to obtain objective information. 
One of the first steps to develop the generic framework was to analyze the agropark concept. An 
agropark can have different institutional settings. Key issues and risks are identified in these 
settings. New Institutional Economics theory is used to determine how institutional factors influence 
success or failure of agroparks. This is combined with practical examples of five agropark projects, 
among which Greenport Shanghai and New Mixed Farm. 
 
For development of the risk model, a Monte-Carlo simulation in combination with fault tree analysis 
is used to quantify risks. With the Monte-Carlo method, the opportunities and downside risks per 
category can be quantified with probability distributions which indicate the magnitude and chances 
of various outcomes. The results can then be used for further decision analysis, such as evaluating a 
particular investment project or a particular financial or organizational structure. 
The data for the risk model are retrieved from statistical databases of CBS, EuroStat, Farm 
Accountancy Data Network, and from scientific and empirical publications on key agricultural 
sectors.   
 
3.  Results and findings 
 
Factors jeopardizing agropark development 
Experience from five agroparks showed that the development of agroparks can be jeopardized by: 
1) Social or legal resistance to the development of the agropark;  
2) The economic or environmental impact elsewhere;  
3) Technological problems in implementing the concept;  
4) The level in which stakeholders share the value propositions of the agropark and agree to 
cooperate under these propositions;  
5) The level in which participating enterprises are prepared to stick to cooperation agreements even 
when they become unfavorable due to changes in market conditions. 
 
Institutional setting key in success  
The analytical framework that is developed in this project, showed the impact of institutional 
arrangements on the success or failure of agropark formation. Combined with practical experiences 
of agropark projects it is shown how theoretical advantages of the agropark concept may fail to 
  
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materialize due to high institution cost of organizing, establishing, and maintaining the 
collaboration among different stakeholders as required by the agropark concept. The key to 
successful formation of an agropark was the choice of proper institutional arrangements which 
create high incentives to cooperate and acquire low institution cost. The characteristics of the 
institutional settings are input for the risk model. 
 
Risk model 
The generic risk model operationalizes the theoretical consideration of the factors influencing 
agropark development. The model assesses the formation and business risks of agroparks as a 
whole. The model consists of qualitative and quantitative elements in different phases of the 
agropark development.  
 
A step by step approach is developed to assess the risks of a particular agropark or agribusiness 
cluster, see figure 1: 
 
                
     Figure 1: steps in risk analysis of agroparks 
 
  
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Step 1: Checking the clarity of the project plan 
A survey and checklist are developed to assess whether the project plan is defined. If yes, 
one can go to step 2. 
Step 2: Qualitative risk scan 
If the project plan is well defined, a quick risk scan can be performed to specify the risk 
factors and their possible impacts. A fault tree model and Group Decision Room (GDR) is 
used to assess the risk of agropark formation. 
In order to do a quantitative risk analyses, a detailed business plan is required. When the 
business plan is only broadly defined, quantitative assessment can only be made on the 
formation risk based on expected profiles of the firms involved. This means that for 
agropark projects that are in a conceptual planning phase, only qualitative risk analysis can 
be performed. If a detailed business plan is available, one can go to step 3. 
Step 3: Quantitative risk model 
A stochastic simulation model is carried out to assess the return on investment and key 
variables for success or failure.  
Step 4: Risk Management 
Based on the outcomes of the quantitative risk model (step 3) or the qualitative risk scan, a 
list of risk reduction measures and risk management strategies can be identified. 
 
It should be noted that using the model is not a one-time access and the situation in developing 
an agropark may evolve continuously. As such, risk analysis should accompany the design and plan 
process. Inputs for the risk model should be updated when new information is available. 
 
Insights in challenges facing agropark development 
Besides the Risk Model that has been developed, the project made a number of findings regarding 
the challenges facing agropark projects: 
 Most project plans focus on the technical details and design, and not on clearly specified 
budgets, operational goal and time frame. They often lack giving any insights in the 
management of risks and uncertainties.  
 Implementation often suffers from a chicken and egg dilemma: on the one hand, stakeholders 
are unlikely to commit to the project without a well-defined institutional design. On the other 
hand, this institutional design cannot be defined without committed stakeholders. As a result, 
formation risks are likely to be the major risk of an agropark project. 
  
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 Most project plans for agroparks describe the ideal agropark. The various master plans required 
conditions that can differ from practice, and therefore were unlikely to materialize. A more 
practical approach should start from identifying the divergence between theoretical conditions 
and practice. 
 
4.  Meaning for TransForum 
 
Contribution to metropolitan agriculture 
Agroparks are an example of high tech metropolitan agriculture. The insights and tools that are 
developed in this project are helpful in transforming uncertainties into manageable risks. This is 
needed to make well-informed investment decisions and to shift agropark development from the 
planning to the investing stage, therewith contributing to realizing metropolitan agriculture. 
 
Contribution to connected value development 
Agroparks connect people, planet and profit values. The different institutional settings of agroparks 
determine the success of the agropark and therewith the actual value capturing. Insights into the 
possible opportunities and risks can serve as a basis for designing sustainable institutional 
arrangements among the stakeholders. 
The risk model is also useful or even recommended in the investing and implementation stage. 
Changing conditions in the agropark development process requires updated risk assessment 
throughout the different stages. The theories and methods in this project provide a philosophical 
and methodological basis to tackle challenges in the implementation and operational phase.  
 
Contribution to the agro innovation system 
Realizing a system innovation in a changing institutional environment, where it is difficult to fully 
understand how the system works, is a real challenge. It can take many years before the process of 
planning and implementing is realized. Agropark development is a dynamic process in which the 
situation may change. Existing uncertainties may be resolved and new uncertainties may arise. Risk 
analysis should therefore be regularly updated to take into account new information. 
 
 
 


Evaluation "Risk analyses of agroparks"

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