Farm Business Resilience

Risk profiling of a business refers to assessing the possible events or circumstances that could expose a business to negative consequences, plus quantifying them relative to the probability of such circumstances occurring. Further to this, profiling risk allows for measures to control and/or eliminate such risks to be developed.

Commodity prices, interest rates, family harmony and the health of key stakeholders, are examples of areas within farm businesses which should all be accounted for when risk profiling a family farming business. It is important to monitor the risk profile of a business to ensure that it can remain resilient to such pressures. 

It is critical that growers manage the resilience of their farm businesses, specifically with consideration to a business continuity plan unique to their enterprise. Business continuity is a proactive approach to risk management, which refers to a detailed plan which can be put into action in the event of any immediate threats impacting the business.

For example, in the event that one of the key stakeholders within a business is injured or deceased, there needs to be a plan which someone, regardless of whether they are internal or external to the business, can pick up immediately to ensure that all short-term and long-term tasks that need to be performed in order to keep the business operational can be carried out. 

For a mixed farming enterprise, this may be in the form of a calendar of operations including but not limited to; key dates outlining timing of operations within the livestock programme, such as joining date, length of joining, livestock records, plus instructions on what records to keep, shearing dates, lamb marking dates, general livestock health management strategies, product sale specifications and key contacts for outsources of the livestock enterprise such as shearing contractors.

Within a cropping enterprise, core operational instructions might include; cropping programmes with annotated details of tasks completed, as well as tasks yet to complete, inventory management and key contacts such as advisors, mechanics, contractors and grain merchants.

Whilst the topic of risk is being discussed, it’s worth exploring the notion that the real wealth within agribusinesses at current times, is derived from capital gains on land assets, as opposed to operating income. With this idea in mind, it begs the question as to the risk level at which the trading enterprise needs to run, where an operating enterprise running at high risk may put the business wealth at a very high risk, if potential losses are not relative and scale requires sacrifice to mitigate the consequences.