Holistic Risk Management – a quantitative assessment of farmers demand for risk management

Holistic Risk Management – a quantitative assessment of farmers demand for risk management

Market Manager, MSc in Economics,

Karsten Bove

[email protected],

+45 8740 5039

DAAS

Det Europæiske Fællesskab og Ministeriet for Fødevarer,

Landbrug og Fiskeri har deltaget i finansieringen af projektet

PurposeThe purpose of the holistic risk management market analysis among farmers, is to identify future development areas needed to satisfy current demand for risk management.

Risks are primarily the factors that threaten the strategic goals of the farm, or secondarily, risk factors that potentially can cause financial loss on assets, liabilities and earnings.

Basically, the risks of the farm can be categorized as follows:

Humane risks (sickness, accidents, death)

 Production risks (illness of livestock)

 Buying and selling (prices on feed, cereals, pigs, milk, electricity and oil)

 Financial (interest rate, currency)

 Institutional (environmental legislation, agricultural legislation, animal welfare)

The study

The intended result of the holistic risk management process is to have an overview of the farms risk profile and subsequently to decide how to handle the risk involved. The purpose of the quantitative study is:

 To identify the risks of the farm according to the farmers

 Evaluate the importance of the risk factors according to their needs

 Evaluate the current performance of the risk management service offered to the farmers

 Identify future development areas in Holistic Risk Management

Method

The qualitative study was conducted with lead-users among large farms in Denmark to uncover the needs for holistic risk management, using a structured question guide with open-ended questions. 19 interviews were conducted with large scale farmers with adequate diversity with regards to type and geographical dispersion. Furthermore, diversity across types of production like dairy cattle, veal calves, pigs, plant and organic farming. The lead-user method is a qualitative interview technique used in relation to respondents judged to be leaders on one or more business fields in relation to their farms.

In order to analyze the need for Holistic Risk Management a quantitative study was performed, and the survey received more than 500 answers from farmers that were Danish Agricultural Advisory Service clients.

Farmers of different sizes and other SME on rural areas were included to ensure that the findings were relevant for all types of customers of Holistic Risk Management.

ResultsThe results of the quantitative study showed that Holistic Risk Management is most important to full time farmers, and less relevant to part time farmers. Furthermore, the most pertinent risk factors according to full-time farmers are:

Risk profile evaluation

Overview of the risk factors involved in Holistic Risk Management

Financial risk management

Optimization of risk with regard to strategy and economic costs

External threats and how to handle the Governments Green Growth Initiative

The market for Holistic Risk Management seems promising. More than 40 percent of the farmers in the survey spend more than DKR 40.000 a year on services and advice, and they are also potential customers for Holistic Risk Management.

Conclusion

Strong need for tools to create an overview of risk factors (Holistic Risk Management) and a need for a combination of strategy, risk management and action plans, especially in areas such as:

Finance

Purchasing and sales

Production

Family related risks

Green Growth initiative