The importance of risk management for farmers

Despite Australia's standing as a thoroughly modern, fully developed nation, agriculture still makes a significant contribution to our economy, and employs hundreds of thousands of our people. With such a long history of working the land right across the nation, right from the time of earliest settlement, you would be forgiven for thinking we have a handle on all aspects of farming.

You might be surprised, then, to learn just how few Australian businesses - farms included - have an effective risk management strategy. In EY's inaugural governance, risk and compliance survey, the company found that 85 per cent of respondents identified an opportunity for their business to benefit from an improved link between risk management and business performance.

Developing risk management on the farm

Many of the risks to farms in Australia, whether financial or health-related, come from our unpredictable, and often vicious, weather. While large swathes of the countryside have been hobbled by drought for several years, seasonal bushfires, cyclones and floods also play havoc with farmers' livelihoods each and every year.

Arthur Gearon, panellist for the Grains Research and Development Corporation (GRDC), notes that it's important to concentrate your strategy on those few factors you can manage.

"While we certainly can't control Mother Nature, we can put some strategies in place to protect our crops and profitability. More often than not, this will consist of implementing agronomic best practice, keeping abreast of the latest research information and having a good, commonsense risk management strategy in place," Mr Gearon said in a December 1 GRDC article.

Mr Gearon's advice for developing a good risk management strategy on farms includes tips such as:

• Identifying the individual business risks as best as you can
• Weighing the potential impact of risks against their likelihood of occurrence
• Focusing on strategies to manage the major risks

The importance of crop insurance

As noted by Mr Gearon and the GRDC, the most effective way to manage the risk of adverse weather is by securing comprehensive crop insurance. While many risks around the farm can be predicted and planned for, there's no accounting for Australian weather patterns, so all you can do is minimise the financial impacts if and when the storms or drought hit.

If you're concerned that your risk management strategy doesn't pass muster, or you simply want to assess your entire farm insurance cover, make an appointment to speak to an expert insurance agent today.