Managing farm business risk

ONLY 30 PER CENT of Canadian farmers say they have a risk management plan, according to Farm Management Canada, and typically this is limited to planning for price and yield. A 2015 study conducted by the same organization revealed having a risk management plan and contingency plans in place leads to better financial performance. And recent research on mental health revealed 88 per cent of farmers report business planning provides them with a greater peace of mind and better coping mechanisms when facing uncertainty and stress.

If business planning and risk management helps farmers cope with uncertainty and sleep better at night, while making more profit, why aren’t more doing it?

“We know changing management behaviour takes time, especially when it means using a new tool or practice,” explains Mathieu Lipari, program manager with Farm Management Canada. “Unlike production where you plant a seed and watch it grow, the return on business practices is a long game. But we are all living in a time when farming, markets, and global events have never been more uncertain. And farmers should be reminded that risk management tools could be the solution to deal with unknowns.”

NEW TOOL

That’s why Farm Management Canada created AgriShield® (www.fmc-gac.com/agrishield). This new risk assessment and mitigation platform for Canadian farmers was launched in spring 2019. The first of its kind, the online tool offers a 360° view to assess and manage risks on the farm, guiding the user through six areas of risks – people, finance, markets, management, business environment, and production. The platform can also help farmers leverage existing risk management tools, professional farm services, and work with farm advisors. AgriShield is an easy-to-use platform to assess and identify risks, develop a plan, and follow up on those plans to ensure they are carefully monitored and regularly improved.

“With AgriShield, producers are able to put an action plan in place to minimize threats and maximize opportunities for their business,” says Lipari. “While farm inputs, values, and uncertainty are on the rise, farm business management continues to be undervalued, misunderstood, and isn’t practiced by most farmers. We’ve seen a slower uptake, but that reflects farmers’ attitudes to managing farm business risks.” Lipari says he anticipates an increase in users as a result of new Farm Management Canada industry partners, increased promotion and possibly because of COVID-19 as farmers are facing unprecedented risk and are more open to using online technology to meet their management needs.

HOW IT WORKS

In order to effectively manage or minimize risk, a proven risk management process includes assessing personal risk tolerance, identifying, assessing, and prioritizing risks, creating a plan, and leveraging necessary tools. “This is exactly what AgriShield was built to do,” says Lipari.

The easy-to-use online platform begins with creating a profile where they are guided through a risk roadmap to identify key areas of risk on the farm and sort them from high to low risk. This personal assessment process doesn’t require any data and is done through a series of simple, straightforward questions. Once the roadmap is complete, farmers can begin assessing individual risk situations in depth using a series of additional questions to determine the frequency or likelihood and impact of each risk situation. Each risk is measured by current best practices already in place and identifying those that aren’t, along with overall preparedness of the farm to face the risk situation. This evaluation is compiled on a scorecard to compare and prioritize all the risks assessed.

Finally, the farmer is guided to an action planning module where they can select best practices to implement on their operation to address the identified risks and assign the responsibility and timeline for the activity. AgriShield offers a full suite of tools and resources for each risk category, including organizations, webinars, articles and websites to help the producer manage and implement the mitigation plan.

“One of the most essential steps in risk management is developing an action plan and measuring progress,” says Lipari. And AgriShield has a module for that too. The action plan can immediately be implemented by the producer or shared with members of their farm team, farm support services or a trusted farm advisor for additional assistance. The program tracks any pending or newly implemented risk management activity so platform users can monitor their own progress.

“We recommend regular use of the platform to continue building on the action plan, monitoring timelines, and marking achievements when practices have been implemented.”

Farmers also have access to AgriShield’s reassessment feature to review initial assessments and track situational changes.

RISK

“The need for an easy-to-use risk management tool is clear – farming is a risky business,” says Heather Watson, Farm Management Canada’s executive director, referencing a 2013 KPMG international study that compared major industry sectors for risk exposure and preparedness.

The research found food production was rated one of the highest for risk exposure and the lowest for preparedness. “We are still in that vulnerable situation today, where a critically low number of Canadian farmers have a risk management plan, and now with the recent pandemic and resulting global insecurities, risk management is more important than ever.”

Farm Management Canada has presented the AgriShield concept and platform at the International Farm Management Congress and believes this new online tool may be the only product of its kind in the world. AgriShield was recently benchmarked against the SAI Platform’s Farm Sustainability Assessment (FSA) and received gold level equivalence.

“That means many of the best practices proposed on the AgriShield platform to deal with risks can also help a producer increase their sustainability and reach gold status,” says Watson. AgriShield is the first agricultural risk management platform to receive this status worldwide.

“AgriShield is the latest tool that will enable our industry to take a proactive approach to managing farm risk,” says Watson. “This platform will help position producers to better respond to increasing uncertainty and volatility in agriculture and provide a path forward to continue to achieve their goals and prosper for generations to come.”

ROOTS TO SUCCESS

“Farm management is about building your capacity to weather any storm to the best of your ability, while positioning your business to pivot in order to seize opportunities,” says Mathieu Lipari, Farm Management Canada program manager. The development of risk management tools and resources are a focus for Farm Management Canada.

A popular Farm Management Canada training workshop, Roots to Success, is now available online and, as a result of the COVID-19 pandemic, has been modified into two three-hour sessions. The program guides a farmer through the same risk management process that AgriShield offers, providing participants with access to the AgriShield platform, populating their profile with information collected through the training sessions.

For more information on these online tools, visit www.fmc-gac.com. •