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fm6e-chapter15 - Farm Management Chapter 15 Managing Risk...

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Farm Management Chapter 15 Managing Risk and Uncertainty
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farm management chapter 15 2 Chapter Outline Sources of Risk and Uncertainty Risk-Bearing Ability and Attitude Expectations and Variability Decision Making Under Risk Tools for Managing Risk
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farm management chapter 15 3 Chapter Objectives 1. Identify the sources of risk and uncertainty 2. Show how risk and uncertainty affect decision making 3. Discuss how attitude and financial stability affect risk 4. Illustrate ways to measure risk 5. Demonstrate methods to help make decisions under risky conditions 6. Discuss tools to reduce risk or control its effects
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farm management chapter 15 4 Sources of Risk and Uncertainty Production and technical risk Price and market risk Financial risk Legal risk Personal risk
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farm management chapter 15 5 Figure 15-1 Causes of insured crop losses Insert figure 15-1 here, no title
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farm management chapter 15 6 Risk Bearing Ability and Attitude Producers vary greatly in their willingness to take risks and in their abilities to survive any unfavorable outcomes of risky actions. The level of risk a business should accept is very much an individual decision.
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farm management chapter 15 7 Ability to Bear Risk Financial reserves play a big part in determining an operation’s risk bearing ability. Farms with a large amount of capital can withstand larger losses before becoming insolvent. Cash flow commitments also affect the ability to repay loans.
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farm management chapter 15 8 Willingness to Bear Risk
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