Assessment of Rainfall Risk in a Financial Perspective: An Application to the Wine Industry

Abstract

Climate change is an increasingly critical phenomenon in agriculture, which includes wine production. Rainfall appears to be extremely important for wine production; however, it can become a disaster in large quantities. Given the nature of external risk to the enterprise, rainfall financial risk, that is, the risk of decreasing revenues due to persistent rain is difficult to forecast, manage and monitor. Therefore, it is crucial for wineries to assess such a risk to safeguard their business performances. This study adds to the literature on wine, weather and risk assessment by developing an assessment method of rainfall financial risk for small- and medium-sized wine enterprises. In particular, starting from the result of applying the proposed method, that is the assessment, or not, of rainfall financial risk, it is possible to make recommendations to a winery on the adoption, or not, of mitigation measures of such a risk with the final goal of preserving profitability and solvability. The proposed method was empirically applied to a selected group of wineries located near Lake Garda (Northern Italy), during the period 2010–2019.