Why manage risk?
By managing and planning for Risk, you can reduce the impact of negative and unexpected events on your farm business. Effective risk management is vital in maintaining a profitable and sustainable business.
Understanding and analysing the different types of risk your business may face can allow you to plan ahead and balance risk with reward.
Whilst farmers have always had to deal with uncertainties of weather, commodity prices, pest, disease and other legal, social, and political risks, strategies can be developed for coping and managing these risks.
In developing a risk management plan consider:
- What is the risk
- Analyse and assess the risk – what is the likelihood and impact of the risk occurring
- Prioritise the risk – it can be helpful to develop a risk score to rate the risk
- Develop a strategy or action to manage the risk
- Monitor and review the risk plan
The advantages of developing a risk management plan are:
- Decisions can be based on research and current information
- Strategies and actions can be monitored and reviewed
- Risks can be modelled in cash flow budgets and provided to banks & financiers
- Objective financial assessment on diversification
Your Rural Financial Counsellor can support you to review and develop a risk management plan for your business.