All businesses encounter one form of risk or another. Agribusiness is no exception. During the Smartpreneur webinar themed Agribusiness: Understanding the trends and opportunities, CEO Visionage Agrotech Farms, Mrs Edobong Akpabio, explained in details, the various risks agripreneurs face and how they can be effectively managed.
Risk refers to a possible event that could cause harm or loss, or affect the ability to achieve objectives. it involves the uncertainty regarding the effects and/or implications of that eventuality to something valuable to a community, organization or an agripreneur.
Risk management is the identification, evaluation and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events (Wikipedia).
Mrs Akpabio mentioned production and financial risks as some of the major risks in agribusiness.
Production risk relates to the possibility that output or yield levels may be lower than what was projected. The major sources of production risks are adverse weather conditions such as drought, excessive rainfall, etc. Production risks may also result from damage due to insect pests and disease, failure or unavailablity of equipment such as irrigation pump.
How to manage production risks:
- Follow generally accepted standard principles in your business procedures or operations.
- Go for pest/disease resistant species
- Deploy innovative technologies
- Adopt precision and climate-smart agribusiness
- Follow Good Manufacturing Practice, ensure you produce standard products
- Buy insuarance cover
Financial risk is another type of agribusiness risk that agripreneurs are likely to encounter. Financial risks resulting from unexpected and impactful events involving capital, and cash flow. This is due to pricing, inaccurate estimates and understanding of cash flows, inflation, changes in interest and exchange rates.
How to manage financial risks:
- Develop a strategic business plan
- Monitor financial reccords and business objectives
- Keep expenses low and increase revenue
- Build a good relationship with suppliers and funding providers
- Consider leasing and rental options rather than purchasing assets
- Evaluate the possibility of outsourcing
- Prepare a budget and stick to it
- Explore volunteer programmes to reduce costs.
Managing risks in Agribusiness starts with understanding the potential impacts and likelihood of undesirable outcomes and taking possible steps to mitigate the impacts.
For more details on Agribusiness risks and management from Mrs Edobong Akpabio, click here