Risk management isn’t the most exciting term in the world, but it is one of the most important farm business management topics. Risk management on Australian farms includes human resources risk, marketing risk, production risk, finance risk, legal risk, climate risk and biosecurity risk.
Managing risk on farm has been divided into four key areas:
Production/Yield Risk: this refers to the risk that yield or production output might be lower than budgeted. These risks can arise from weather and climate impacts (including drought, frost, lack of rain or too much at particular times, weeds, pests or disease, or machinery and equipment failure. Strategies to inhibit these risks include diversification, crop insurance or livestock insurance. Learn more about farm, crop and livestock insurance options for your agricultural products in Australia.
Market/Price Risk: this refers to the risk that the price you expect to receive is not met or the markets for your products shrinks so sales are inhibited. Strategies to overcome marketing and price risks include marketing strategies and entering into production or sales contracts.
Financial/Legal Risk: this refers to financial risks (not having enough cash to meet obligations) as well as legal risks (not fulfilling agreements or contracts). Strategies to reduce this risk include insurance and understanding your obligations.
Biosecurity Risk: farm biosecurity involves protecting your farm, crops and livestock from disease, pests, weeds and chemicals. Access risk management plans for your farm.