Risk Management

Dairy farming businesses, like other businesses, face a variety of risks; from exposure to movements in the input and output markets, livestock health status, family changes and the weather.

A Risk Register will help you to think about the risks your business faces, how much of risk they are to you and how you might mitigate them to reduced or eliminate the risks.

Volatility in both output and input prices has been higher in the last decade, making it increasingly difficult for business across the supply chain to meet break-even costs and maintain long-term profitability. With volatility expected to continue, it is important to consider strategies and risk management tools that can help reduce exposure to movements.

Businesses that are able to achieve greater stability in their cash flow will be able to plan and invest for the future with greater confidence.

Strategies and tools developed from the financial markets are one of the most successful methods of managing price risk. The financial markets provide an opportunity to manage price risk through the use of futures, futures-based forward pricing contracts and options.

Farm Business Risk Management 

Farm business risk management is a continuous process by which farm businesses identify the likelihood and impact of key risks and their financial impact e.g. price volatility and animal disease.

Alongside this it is the creation of action plans to manage key risks as well as an ongoing drive for increased financial resilience e.g. competitive cost base, to cushion unknown and difficult-to-manage risks.

There are five pillars that support the development of a farm business that is set to manage risk and be more resilient. 

5 pillars of farm business risk management