cfoaxis_round1.pdf
TRANSCRIPT
Amaethon’16 - CFO axis
Round 1
With agriculture being considered the backbone of India, farmer suicides has become a serious
public policy concern. Most recently, this has led to a shrill media outcry and much politicking.
The government response to the crisis of farmer suicide has mostly been simplistic and sometimes
aggravating. The main issue with offering “special packages” to deal with such a problem is that
it is reactionary rather than preemptive solution.
Mr. Ballaldev, is a bank manager from Ahmarat, a small village from Maahishmati who has come
up with an idea to address the financial distress caused due to improper weather forecast using
predictive analytics. He gathered historical and forecasted weather data of Ahmarat to create a
profile which could aid in designing a profitable ‘weather insurance’ to the farmers.
The following were the important statistics he had obtained from the analysis of the weather and
agricultural data of Ahmarat:
The land of Ahmarat has no surface water sources. A bore well costs on average INR 6 million.
There is on an average 11% chance of failure for sinking a bore well and a 7% chance of a drought
(when no produce will happen) and a 5% chance of floods (no crop can survive). Ballaldev
announced a banking product that is a simple pool insurance with no fund investment possible
apart from govt. bonds that yield 8% per annum at the end of 4 years. The current interest rate is
10% on fixed deposits of 6 months duration. Ahmarat’s farms are distributed as follows amongst
the three major crops of X, Y and Z with the three kinds of farmers based on the area they hold.
[Table 1]. Currently there are a total of 10000 farmers in Ahmarat and a study further stated that
there can be migration of farmers from Ahmarat due to the natural calamities and lack of assistance
from government.
Ballaldev approached the local government with his idea which has promised to increase
awareness about the weather insurance. Ballaldev had estimated that the number of insured would
increase YoY by 20% every year with the increased awareness among farmers. It is further known
that in any given adverse weather event 20% of farmers can protect against the event using the
recommendations from crop agencies. Ballaldev has hired you to calculate the profitability of the
scheme over 10 years. Calculate the premium to be charged to make the scheme successful without
any subsidy. Also mention the conditions / assumptions under which the scheme will be successful
and the value you are adding to the farming community.
Table-1
Land/crops X Y Z
1-5 acres per farmer 30% 15% 10%
5-10 acres per farmer 10% 10% 5%
10-20 acres per farmer 5% 5% 10%
Table-2 (All in INR)
Crops X Y Z
Cost of farming/acre 600 900 1200
Revenue/acre 750 1020 1430
Deadline for submission: 11:59:59pm 2nd January, 2016
Submission guidelines:
Total slides: Maximum of 6 slides (**Index and Executive summary are mandatory**)
Submission format: PDF
Naming of pdf: Teamname_CFOaxis_R1
Submission to be mailed to [email protected] with subject line:
CFOaxis_Round1_Team name
Format:
Index slide (With names of members, college & team name, mail id and contact of team leader)
Slide – 1 (Executive summary – Should not exceed one slide)
Slide – 2 (Assumptions made for calculations and rationale for the same)
Slide – 3, 4, 5 (Methodology, Important calculations, Optimistic value, Pessimistic value, Final
conclusion)
Criteria for evaluation:
- Understanding of the problem
- Assumptions made and the rationale (Hint: Key for solving this case)
- Methodology and Coherence of presentation
- More than the final numerical answer the process followed has higher weightage
*Decisions made by the organizing committee will be final and binding