The risk management component is of course very important. Source- Deloitte, 2019 Risk Management Survey Rules To Manage The Risk. The age group distribution indicates that the majority of the farmers in both regions were over 40 years old. Only about four per cent had loans from commercial banks. Table 7 shows the relationship between all farmers’ socioeconomic status and the different perceptions of sources of risk components. reported that ‘placing of investments’, ‘obtaining market information’ and ‘enterprise diversification’ were the most important strategies that the sampled crop and livestock farmers use to handle risk in the US. Mustafa argued that the educational level of farmers affected their decision making capacity. A part of risk management is a determination of risk versus reward. Similarly, the age of farmers and farm size are negatively related to the ‘natural disaster’ risk, which means young farmers and farmers who have smaller farm sizes tended to perceive ‘natural disaster’ as a higher on-farm source of risk. Once a risk’s been identified, it is then easy to mitigate it. The small size farm group tended to have a higher awareness of production risks than the other two groups. When a business evaluates its plan for handling pot… The table shows that marketing risks associated with ‘unexpected variability of input prices’ and ‘unexpected variability of product prices’ had the highest and second highest mean scores for sources risk, respectively rated by the farmers in both regions. The highest educational level was positively related to the ‘farm production and marketing management’, ‘diversification’ and ‘off-farm income’ risk strategies. The prices of the major cash crops in Thailand, such as rice, cassava and sugarcane, are unstable; they depend on supply and demand in both local and international markets. In addition, eight per cent of the farmers used their own savings to operate their farm business. Incorporating and understanding the effects of risk at the farm level will benefit policy makers who develop appropriate strategies that can help farmers survive the numerous risks they confront. (9) Using size of the respondents’ farms as large, medium, and small farms, the author argued that a farmer’s awareness of the sources of risk varied depending on farm size. The rotated factor loadings of risk sources for all farmers in the central and north-east regions, obtained from the principal component analysis and a varimax orthogonal rotation, are discussed in this section. However, this scheme has recently been terminated due to limited government budget and this consequently reduced opportunities for the farmers to control production costs. Sources of risk that obtained low mean scores included ‘changes in technology and breeding’, ‘changes in land prices’, ‘risk from theft’, ‘changes in the situation of farm families’ and ‘unable to meet contracting obligations’. 9 - What are the advantages of calculating a Supplier... Ch. The findings from the survey revealed that the smallholder farmers in both regions used a mix of risk strategies to manage and reduce the sources of risk they are confronted with. Knowledge risks map (source: Durst & Zieba 2018). Help us write another book on this subject and reach those readers. This is because most north-east farmers are poorer. In addition, the effects of price policies such as the pledging scheme should be assessed cautiously to improve the effectiveness of the scheme. Agriculture contributes approximately 7.86 per cent to Thailand’s GDP and 8.98 per cent to exports in 2008. Farmers in Lampang typically faced ‘drought’, ‘insects causing damage to rice’, ‘low output prices’, ‘pests’, and ‘high input costs’. This demonstrates an adequate reliability among those factors. The sources of information available include farm records, off-farm statistics, information from input dealers, traders, extension workers and other farmers and market price data. Similarly, the net farm income coefficient shows a negative relationship with all four risk strategy components. (24) An insurance scheme was rated as the appropriate strategy to manage risk. Farmers with larger households perceived ‘farm production and marketing management’ as slightly more important than smaller household farmers. Contact our London head office or media team here. Gender is negatively related to the ‘personal and farm business environment’ and ‘natural disaster’ risks on farm. (19, 20) Extant literature shows that there is no agreement about the most appropriate methods to describe sources of risk and risk responses on farms. The major sources of production risks are weather, climate changes, pests, diseases, technology, genetics, machinery efficiency, and the quality of inputs. This interesting finding might be attributable to the fact that sources of risk vary depending on the farm’s geographical condition, farm type, the environmental impact and the country’s political and economic situation. Identifying risk categories aids the future consolidation of activities in risk mitigation plans. noted that organic and conventional dairy farmers in Norway perceived ‘increasing farm liquidity’, ‘disease prevention’, ‘buying farm insurance’ and ‘cost of production’ as the most important strategies used to deal with risk on their farms. Identifying risk sources provides a basis for systematically examining changing situations over time to uncover circumstances that affect the ability of the project to meet its objectives. This suggests that less experienced farmers were more likely to be interested in employing these strategies to manage risk on their farms than the more experienced farmers. A nationwide mail survey was used to examine the sources of risk and the risk management strategies of New Zealand farmers by Martin(23). make rational risk management decisions. In addition, agricultural commodity prices rise and fall annually depending on the demand and supply in both local and international markets, which are out of the farmer’s control. This implies that female heads of farm households are likely to perceive these sources of risk as significantly more important than male household heads. This finding may have resulted from the instability of Thailand political situation since September 2006. Sources of Risk and Risk Management Strategies: The Case of Smallholder Farmers in a Developing Economy, Risk Management - Current Issues and Challenges, Nerija Banaitiene, IntechOpen, DOI: 10.5772/50392. Without much knowledge in risk management, a project manager cannot plan accordingly. 9 - Describe the major sources of supply base risk.... Ch. Akasinha, Ngamsomsuk, Thongngam, Sinchaikul and Ngamsomsuk examined risk perceptions among rice farmers in Payao and Lampang provinces in the northern region. In most of those studies, the respondents were asked to rate the sources of risk that affected their farm and the risk management strategies they used on a five-point scale (where 1 is not particularly important and 5 is highly important). This may imply that farmers in the north-east region perceived these risk strategies as more important than the central region farmers. The respondents were grouped into five types of farm; mixed farming; cotton; corn, soybean and hogs; small grain and ranch. (34) This scheme aimed to help farmers when commodity market prices fluctuated early in the harvesting season. In addition, Cronbach Alpha was employed to evaluate the internal consistency of each factor.(28). Sources of risk in agriculture are classified into business risk and financial risk. The authors ranked production cost variability and animal welfare policy as the greatest worries for conventional dairy farmers. A factor loading of ± 0.4 was employed as a cut off criterion to determine the inter correlation among the original variables. Off-farm work was positively related to all four risk strategy components. The pledging price was set by a government announcement and generally the pledging period is approximately five to seven months each year. Similarly, the average prices of the major farm inputs such as fertilizer NPK 16-20-0, which is widely used by rice farmers, fluctuated from 9,485 baht/tonne in 2006 to a peak of 19,386 baht/tonne in 2008 and then dropped to 16,199 baht/tonne in 2009. However, the annual household income and the size of farm household exhibited a positive relationship with this source of risk. In 2007, the average monthly income per farm in this region is 15,271 baht. This technique enabled the researcher to manage and reduce the number of original variables into a smaller group of new correlation dimensions (factors), which are linear combinations of the original variables. Factor AS2: this factor incorporates a number of sources of risk related to the farm business environment, including risk from being unable to meet contracting obligations, problems with hired labour, theft and changes in land prices. However, the pledging scheme has been widely debated among policy experts, especially for rice. (25) In a recent study, large-scale South African sugarcane farmers perceived land reform regulations, labour legislation and crop price variability as the three most important risk factors. Risks related to the ‘economic and political’ and ‘personal and farm business environment’ were perceived as highly important by farmers who had off-farm work. Therefore, this factor is named ‘personal and farm business environment’. (3, 4) The sources of risk and level of its severity can vary according to the farming systems, geographic location, weather conditions, supporting government policies and farm types. However, the preliminary results indicated three sources of risk including ‘accidents or problems with health’, ‘deficiency rainfall’ and ‘changes in technology or breeding’ should be eliminated from the factor analysis because of their low communalities (<0.40). Login to your personal dashboard for more detailed statistics on your publications. of farmland in the central region were damaged.(32). Varimax rotated factor loadings of risk management strategies for all farmers sampled inThailand (n=800). Table 4 summarizes the results of the perceptions of risk management strategies elicited from the farmers in the central and north-east regions. and Patrick et al. It lays foresight for returns on investments and projects all … 4 Managing risk in farming INTRODUCTION Farming is risky. Strategic risk is multidimensional while tactical risk has an identifiable one-to-one exposure such as price risk to futures contract (i.e. Available from: Sources of risk and risk management strategies on farm, Diseases and pests that affect plants and animals, Changes in Thailand’s economic and political situation, Changes in national government laws and policies, Natural disasters such as heat, fire, flood, storm, Changes in the world economic and political situation. This is because farmers’ groups or cooperatives can help farmers to improve their negotiating power. Multivariate regression of the source of risk components and household and farm characteristics of all sampled Thai farmers (n=800) a. The final results of the varimax rotated factor loadings for each risk strategy are documented in Table 6. Factor analysis was employed to reduce the risk strategy categories as perceived by the farmers in both the central and north-east regions. In contrast, farmers in the north-east had an average farm size of 14.80 rai (2.37 ha) of which 90 per cent was self owned. We are a community of more than 103,000 authors and editors from 3,291 institutions spanning 160 countries, including Nobel Prize winners and some of the worldâs most-cited researchers. Similarly, the costs of farm inputs also vary each year and may negatively affect farm production costs. Establishing categories for risks provides a mechanism for collecting and organizing risks as well as ensuring appropriate scrutiny and management attention to risks that can have serious consequences on meeting project objectives. This implies that the more educated farmers perceived these risk management strategies as highly important. The reason is because the more educated farmers realized that the family farm situation and the changes in farm business environment, such as high labour wages and relatively high prices of agricultural land, may indirectly affect their farm operations. Sources of Fiscal Risk 8. capital market theory. However, the north-east farmers perceived the importance of ‘holding cash and easily converted cash assets’ significantly higher than the central region farmers. Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings. Risk management is essential in any business. The factors AR1-4 can be named according to each factor structure as follows: Factor one (AR1): this factor has a relatively high loading of the risk strategy variables related to ‘apply pests and diseases programme’, ‘storing feed and/or seed reserves’, ‘have a farm reservoir for water supplies in dry season’, ‘spreading sale over several time period’ and ‘obtaining market information on prices forecast and trends’. To date our community has made over 100 million downloads. Thus, factor three is named ‘off-farm income’. However, the coefficients of determination (R2) of most of the models are low. On the other hand, financial risk occurs when farmers borrow to finance farm activities as farmers often face variations in interest rates on borrowed funds, inadequacy of cash flow for debt payments and changes in credit terms and conditions. Risk management strategies are the tactics for dealing with these risks and understanding their potential consequences. In addition, ‘reduce debt level’ was given greater importance by the north-east farmers, whereas ‘investing in non-farm businesses’ was more important among the central region farmers. Built by scientists, for scientists. The average farm size of the farmers in the central region was 21.40 rai (3.42 ha) of which 30 per cent was self-lease operated. The goodness-of-fit coefficients of all models were rather low, except for model three where the coefficient explained around 27 per cent of the variation of the dependent variable. Factor AS4: this factor can be interpreted as the ‘financial situation’ because of the high factor loadings on the changes in interest rates and high level of debt. Factors AS1‐6 can be labelled in accordance with the significant loading variables that were obtained for each factor and explained as follows: Factor AS1: this factor is named ‘economic and political’ because of the relatively high loadings on the sources of risk variables with the changes in Thailand and the world economic and political situations and changes in the government laws and policies that affected the small farm operations. The lack of relevant information on farmers’ risk perceptions and their risk behaviour present a challenging task for policy makers and researchers who want to create a proper risk management system to help farmers. Changes in family situation such as marital status, inheritances, etc. Farmers who had higher annual household incomes perceived the ‘financial management’ strategy as highly important. Among the production strategies perceived by the central region farmers, ‘purchase farm machinery to replace labour’ was the most important with an average rating of 3.45. After establishing the context, the next step in the process of managing risk is to identify potential risks. It should be noted that farm size is one of the constraints to diversification, that is, farmers with a small holding have limited ability to diversify their farm activities.(33). This finding supports Limsombunchai, who argued that smallholder farmers in rural Thailand lacked investment funds due to a credit accessibility barrier.(31). (38) Conversely, some economists argued that the pledging scheme would have long-term negative impacts on the efficiency of the country’s rice market and it seems that the management of the scheme is shaped by political forces. This result illustrated that factor AR3 had a stronger internal consistency after ‘use forward contracts’ variable was deleted. Only 10 per cent of the farmers in both regions had used this strategy to manage risk. The north-east farmers considered these two production strategies as ‘important’ but the central region farmers rated them as ‘quite important’, which is statistically significant different (P<0.01). The sample selection process is as follows. As the project progresses, additional sources of risk can be identified. ‘Storing feed and/or seed reserves’ and ‘have a farm reservoir for water supplies in dry season’ showed significant differences in importance between the farmers in the central and north-east regions (P<0.01). First, the provinces in each region were separated into two main groups: (a) the provinces with large and medium irrigation systems and (b) the provinces in the rain-fed area. The results reflect the heavy floods that inundated the central provinces during September 2008. The results indicated that the lack of farm resources may affect the diversification performance of the farmers in both groups. Risk Management Methodology - PM Hut June 29, 2010 […] have already covered the sources of risk, and now we’ll start looking at a simple methodology which can be employed to evaluate these […] Risk management is the identification, assessment, and prioritization of risks or uncertainties followed up by minimizing, monitoring, and controlling the impact of risk realities or enhancing the opportunity potential by applying coordinated and economical resources. The central and north-east regions differ in terms of resources, economic development and income distribution. Models 1-4 are statistically significant at the one per cent level. Meuwissen, Huirne, and Hardaker identified price and production risks as the most important sources of risk for livestock farmers in the Netherlands. First, the crop insurance scheme itself should not be too complicated because it could lead to high administrative costs for the scheme. This finding is similar to that of Mustafa who argued that the more educated farmers performed better in managing their farm business compared with less educated farmers.(30). Second, the appropriate insurance premiums and coverage accessibility under the scheme for each crop must be carefully considered. To start managing your construction risks, you need to be able to list out what could jeopardize your projects. Multivariate regression of the risk strategy components and household and farm characteristics of all sampled Thai farmers (n=800) a. (28) Following this, iteration of varimax orthogonal rotation was performed. With regard to the farm location variable, the regression result showed a strong relationship with more than half of the risk factors. Ch. In addition, Bartlett’s Test of Sphericity was statistically significant at the one per cent level (χ2 = 3301). Sometimes a company can … Itâs based on principles of collaboration, unobstructed discovery, and, most importantly, scientific progression. One of our Project Management Checklists has over 60 examples. Risk is a major concern in developing countries where farmers have imperfect information to forecast things such as farm input prices, product prices, and weather conditions, that might impact the farms in the future. Our team is growing all the time, so weâre always on the lookout for smart people who want to help us reshape the world of scientific publishing. This suggests that farmers who have loans are more likely to pay more attention to the changes to their farm financial situation, such as interest rates and level of debt. Sources of Project Risk. Corporate risk management. Factor AS5: this factor is related to the risk from unexpected variability in yields and the unpredictable product prices. The records kept are a part of this, as any legal action taken by others can be thwarted if there are detailed records that refute their claims. Risks are about events that, when triggered, will cause problems. Evidently, the small farm business may be affected in different ways by changes in these sources of risk. Multiple regression was employed to evaluate the influence of farm and farmer characteristics on the smallholder farmers’ risk perception and risk management responses. 1- Identify The Early Risk Associated With Projects– Risk management is intended to reduce the chances and frequency of risk occurrence. A smallholder farmer is defined as a farmer who has a farming area less than 30 rai (4.8 ha). Establishing categories for risks provides a mechanism for collecting and organizing risks as well as ensuring appropriate scrutiny and management attention to risks that can have serious consequences on meeting project objectives. The distribution of chemical fertilizers at reduced cost was the only scheme that the government organized to assist poor rural farmers. However, the alpha value was somewhat lower (0.426) for factor AS6. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. (2, 5, 6) The types and severity of risks that farmers face differ from place to place. hedging). (21, 22) Meuwissen et al. This implies that farmers who have loans perceived this source of risk as highly important. This observation proves that there is no universal methodology for managing this risk. Sources of Risk in Business Investment:- If we talk only about return on investment without talking about the risk on investment, it will not be sensible. These strategies should be included in a risk management plan, which is a documented process of how your organization or team will identify and address risks. The SDs of both sources of risk in each group were less than one and this indicates that those sources of risk gained a high level of consensus among the farmers in both regions. Resource Risk Labor risks you should become familiar with include Work that is not done, is done poorly, or not on time High indirect labor costs can be incurred Potential conflict with employees Laws and regulations Worker safety regulations/OSHA requirements. Satit Aditto, Christopher Gan and Gilbert V. Nartea (September 12th 2012). This reflects the imbalance problem between agricultural and industrial labour forces in Thailand. Latent root criteria (eigenvalues > 1) were specified for six factors (AS1-6) from the 16 sources of risk variables for all farmers in both regions. This may be due to the ‘natural disaster’ risk damaging their farm crops, which results in insecurity of their farm income and debt repayment capacity. Nearly half of the farmers in the north-east had been involved in agricultural work for over 40 years which implies that younger farmers are rare especially in the north-east. The authors’ results showed that rice farmers in Payao faced five major sources of risk including ‘outbreak of rice disease’, ‘insects causing damage to rice’, ‘high input costs’, ‘flooding’, and ‘shortage of water supply’. This result suggests that less experienced farmers, farmers who have higher annual household income and farmers with larger household size tended to perceive risk related to ‘economic and political’ as highly important. By making research easy to access, and puts the academic needs of the researchers before the business interests of publishers. There are many sources of risks, both internal and external to a project. However, in factor AR3, factor analysis grouped the ‘use forward contracts’ variable, which is unrelated to the definition of this factor. Risk categories are âbinsâ used for collecting and organizing risks. Table 3 summarizes the results of the most important perceived sources of risk for the farmers in the central and north-east regions. Exploratory factor analysis is used to reduce the number of sources of risk and risk management strategies for each group of farmers. In terms of farmer access to credit, nearly 70 per cent of the farmers in the central and north-east regions had loans and nearly half of them borrowed from the Bank of Agriculture and Agricultural Cooperatives. Nearly 60 per cent of central region farmers reported using this strategy to cope with hired agricultural labour problems on their farms. This finding supports Ahmad and Isvilanonda who argued that the rural labour force preferred to work in the industrial sector more than in the agricultural sector due to the gap in wage rates. The sources of risk and their preferred risk management strategies are obtained from face-to-face interviews of 800 farmers, 400 each in the central and northeast regions of Thailand. There is much literature on risk sources that impact farming operations and their risk management strategies. This indicates that the north-east farmers were confronted with the variability of input prices and severe droughts. The findings support Martin, who argued that the farmers’ selection criteria for risk management strategies varied depending on farm type, climatic conditions, marketing factors and agricultural rules and regulations.(23). Identifying risks is a key step in a proactive risk management process. modern portfolio sources of risk, which will be used later when we discuss portfolio and. (40, 41) This challenged policy makers to create mechanisms to stabilize agricultural prices at levels that are economically reasonable for both farmers and consumers. Strengthening the role of farmer groups or cooperatives should be considered as part of agricultural risk reduction policies in Thailand. Moreover, risk from changes in family situation (also as personal risk) loaded highly on this factor. Factor four (AR4): this factor is interpreted as ‘financial management’, which is concerned with ‘reduce debt level’, ‘leasing farm machinery rather than owning them’ and ‘holding cash and easily converted cash assets’. This finding suggests that the sources of risk on small-holding farms differ significantly between these two regions. 1: List the Potential Sources of Construction Risk. The number of years in farming is negatively related to the ‘economic and political’ risk perceptions. Gender was negatively related to ‘off-farm income’, which means that female household heads perceived this risk strategy as more important than male household heads. We will also relate the farmers’ socioeconomic characteristics to their perceived sources of risk and their favoured risk management strategies to gain a deeper understanding of their choices. Open Access is an initiative that aims to make scientific research freely available to all. General Risks Financial strategies associated with ‘holding cash and easily converted cash assets’ and ‘working off farm to supplement household income’ were considered ‘important’ by the farmers in the central and north-east regions. Than half of the risk management responses in Argentina have the team culture that unites everyone in central... 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