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Meaning Of Risk Management

In every agriculture, risk has been playing a significant role always. However, farming activities in America tend to change in the past decades dramatically.

Nowadays, the ranchers and the farmers are being trained and learn every day that modern agriculture has many new rules, new risks, as well as new stakes. The hugely successful farmers of the nation currently are looking for the most knowledgeable and consistent approach towards risk management.

The current survival also means farming while having confidence in the present evolving and changing world, that has new and more attractive opportunities for farming.

The five risks types are generally categorized as; financial risks, production risks, marketing risks, human resources risks, and the legal risks.

The Production risks pertain the natural yet uncertain growth processes of both the livestock and the crops. The pests, weather, diseases, among other many factors, are available to affect the produced agricultural quality and quantity commodities.

The marketing risks are the uncertainties on the prices which the producers will receive from their products or those process they are required to pay for their inputs. The price risks in nature always vary significantly since each commodity depends on its factors.

The financial risks are those risks associated with the farm business borrowing money and creating the obligations for debt repayments. There might be increasing interest rates, the loan prospects that are called by lenders, and the credit availability is also restricted, and those are the financial risks.

The legal risks are due to uncertain government actions surroundings. The chemical use regulations, tax laws, minimal waste disposal rules, the price level or the income support payments are all among the government decisions examples which can bring significant impact towards the farm businesses.

The human resource risks are those factors like social health issues or even personal relationships which tend to affect farm businesses. They can be illness, accidents, disability, death, and divorce, among others, which are personal issues examples that are typically to threaten farm business in the long-run.

Baquet, Alan; Hambleton, Ruth; and Jose, H. Doug; Introduction to Risk Management.  USDA.  RMA. December, 1997.