Risk Management
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and impact of them.
Risk has many forms, but in the business of food and agriculture, shifts in supply or demand and natural causes like weather or disease create significant risk.
Who Has Risk?
Many participants in the food and agriculture industry have risk. Corn growers are impacted by rainfall and the cost of fuel, while grain millers are at risk of securing enough corn to fulfill their contracts with corn chip manufacturers. Meanwhile the chip manufacturers are at risk of lower demand for snacks. Common to all of these businesses is price risk.
Price risk naturally transfers other risks. If demand is low, price will fall. If disease strikes and supplies fall, prices rise. Since profits and sustainability depend on whether you sell or buy at or above break-even values, price risk management is a crucial discipline in any successful business.
