Risk management – just what is it?

It is the identification and the quantification of quantifiable risks; it is the identification and acknowledgement of non-quantifiable risks. It is the planning of procedures to cope with risk. The purpose of risk management is to build business value and create business opportunities by conscious management of risk.

Agriculture has its own unique profile of risk. It ranges from climate risk to market risk. Economically all its risks are manageable – but note, not removable.

It is not the removal of risk but may include the avoidance of risk. It is not related to insurances. Insurances are a tool for assisting with only one aspect of risk management but do not replace the management function.

Allied to risk management is the development of crisis procedures to both quantifiable and non-quantifiable risk.

How does risk management build business value? A simple example is this: a business is significantly profitable as measured by conventional means. It has never suffered a trading loss. It has rewarded its working shareholders well by way of substantial salaries and regular dividends. However, it has no risk management procedures at all. In today’s business environment all of the profitability earned is thus at risk. There is absolutely no assurance at all that those profits are guaranteed to be final. Since it takes secure profitability to enhance the value of a business there is therefore an equal proposition that the value of the business is also not certain. Under these circumstances a risk management policy will place much more certainty that profits and business values are, once established, likely to reflect the real value state of the business.

Our risk management services include:

• Definitions of risk management
• Why have risk management?
• What risk management is not
• Relationship between risk management and acceptable business risk
• Impact/probability judgements
• Risk management is empowering
• Relationship between risk management and crisis plans
• Risk management plans
• Risk personality – accepting/averse