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sources of risk in risk management

Similarly, the costs of farm inputs also vary each year and may negatively affect farm production costs. Establishing categories for risks provides a mechanism for collecting and organizing risks as well as ensuring appropriate scrutiny and management attention to risks that can have serious consequences on meeting project objectives. Risk sources are both internal and external to the project. Around 75 per cent of the farmers in both regions graduated with a primary education and about three per cent were illiterate. These relationships may be due to the farmers who have off-farm work to enhance their farm income; they are willing to adopt such strategies to improve and maintain their farm income. The rotated factor loadings of risk sources for all farmers in the central and north-east regions, obtained from the principal component analysis and a varimax orthogonal rotation, are discussed in this section. This interesting finding might be attributable to the fact that sources of risk vary depending on the farm’s geographical condition, farm type, the environmental impact and the country’s political and economic situation. This finding suggests that the sources of risk on small-holding farms differ significantly between these two regions. Sources of Project Risk. Being unable to meet contracting obligations, Purchase farm machinery to replace labour, Having diversified crop, animal or other enterprises, Selection of crop and/or animal varieties with low price variability, Able to adjust quickly to weather, price and other adverse factors, Problems with hired labour and contractors, Cumulative per cent of the variance explained, Have a farm reservoir for water supplies in dry season, Obtaining market information on prices forecast and trends, Investing in non-farm investment/business, Working off farm to supplement net farm income, Leasing farm machinery rather than owning them, Holding cash and easily converted cash assets, Department of Agricultural Economics, Faculty of Agriculture, Khon Kaen University, Thailand, Department of Accounting, Economics and Finance, Faculty of Commerce, Lincoln University, Christchurch, New Zealand. Second, the appropriate insurance premiums and coverage accessibility under the scheme for each crop must be carefully considered. Only about four per cent had loans from commercial banks. The marketplace in which a company operates is a primary source of risk if demand slows or new competitors enter the fray. This observation proves that there is no universal methodology for managing this risk. Identifying risk sources provides a basis for systematically examining changing situations over time to uncover circumstances that affect the ability of the project to meet its objectives. Farmers in both regions perceived ‘unexpected variability of input prices’ as the most important sources of risk on the farm. The sample selection process is as follows. There are many potential sources of project risk. The aim of this chapter is to examine the sources of risk for smallholder farmers in the central and northeast regions of Thailand and their risk management strategies. Meuwissen, Huirne, and Hardaker identified price and production risks as the most important sources of risk for livestock farmers in the Netherlands. (30) A higher educated farmer was expected to perform better than an uneducated farmer in terms of management skills and farm resource allocation to maximize farm profitability. (16) The central region is known as the ‘rice bowl of Thailand’ and more than half of the country’s irrigation systems are located in this region known for wet-rice cultivation. This result suggests that less experienced farmers, farmers who have higher annual household income and farmers with larger household size tended to perceive risk related to ‘economic and political’ as highly important. and Meuwissen et al. Thus, this factor is classified as ‘yields and product prices’. This may imply that farmers in the north-east region perceived these risk strategies as more important than the central region farmers. Agriculture contributes approximately 7.86 per cent to Thailand’s GDP and 8.98 per cent to exports in 2008. A part of risk management is a determination of risk versus reward. (19) On the other hand, New Zealand farmers used a mix of risk management strategies to reduce risk. The results indicated that the lack of farm resources may affect the diversification performance of the farmers in both groups. ‘Unexpected variability of yields’ was ranked the fifth most important source of risk in both regions. Although strategic planning is not listed as a resource category, it is critical to the overall success of any operation. The undesired event and/or condition 2. Pellegrino studied rice farmers’ perceptions of the sources of risk and risk management responses in Argentina. Source- Deloitte, 2019 Risk Management Survey Rules To Manage The Risk. This indicates that the data were suitable for factor analysis. In addition, risk management strategies related to ‘farm production and marketing management’ and ‘off-farm income’ were perceived as less important by the farmers who had loans. (43) In addition, there are some obstacles that policy makers should consider for the successful implementation of the crop insurance schemes. Financial strategies associated with ‘holding cash and easily converted cash assets’ and ‘working off farm to supplement household income’ were considered ‘important’ by the farmers in the central and north-east regions. HeadquartersIntechOpen Limited5 Princes Gate Court,London, SW7 2QJ,UNITED KINGDOM. The latent root criterion (eigenvalue > 1) was estimated to identify how many factors in each data set to extract. This finding supports Ahmad and Isvilanonda who argued that the rural labour force preferred to work in the industrial sector more than in the agricultural sector due to the gap in wage rates. The reason is because the female farmers or wives can easily find off-farm work, such as weaving and/or handicrafts that are widely found throughout the north‐east region, to supplement their household income. (38) Conversely, some economists argued that the pledging scheme would have long-term negative impacts on the efficiency of the country’s rice market and it seems that the management of the scheme is shaped by political forces. The distribution of chemical fertilizers at reduced cost was the only scheme that the government organized to assist poor rural farmers. Nearly 60 per cent of central region farmers reported using this strategy to cope with hired agricultural labour problems on their farms. (21, 22) Meuwissen et al. (13) The annual rainfall fluctuates widely each year, and pests, diseases and poor soil fertility affect the yields of cash crops in Thailand. This may be due to the ‘natural disaster’ risk damaging their farm crops, which results in insecurity of their farm income and debt repayment capacity. material implications for fiscal risk management. Similarly, the net farm income coefficient shows a negative relationship with all four risk strategy components. This finding is similar to that of Mustafa who argued that the more educated farmers performed better in managing their farm business compared with less educated farmers.(30). Brief introduction to this section that descibes Open Access especially from an IntechOpen perspective, Want to get in touch? This factor is named ‘farm production and marketing management’. Farmers with larger households perceived ‘farm production and marketing management’ as slightly more important than smaller household farmers. This is probably due to the fact that both sources of risk are out of the farmers’ control but directly affect their farm incomes. Help us write another book on this subject and reach those readers. From the survey, farm machinery, such as hand tractors and four-wheel tractors, was widely used among the central region farmers. Gender was negatively related to ‘off-farm income’, which means that female household heads perceived this risk strategy as more important than male household heads. (27) In contrast, the north-east region is defined as the ‘poorest region’ with a long dry season and an annual rainfall that fluctuates widely each year. (17) Most farmers have limited diversification potential, face resource problems, environmental variability, lack of soil fertility and water shortages especially smallholder farmers in the north-east region. Direct access to futures trading markets may perhaps be too complicated for smallholder farmers in Thailand. The findings from the survey revealed that the smallholder farmers in both regions used a mix of risk strategies to manage and reduce the sources of risk they are confronted with. The highest educational level was positively related to the ‘farm production and marketing management’, ‘diversification’ and ‘off-farm income’ risk strategies. Risk is a major concern in developing countries where farmers have imperfect information to forecast things such as farm input prices, product prices, and weather conditions, that might impact the farms in the future. There are many sources of risks, both internal and external to a project. In addition, ‘reduce debt level’ was given greater importance by the north-east farmers, whereas ‘investing in non-farm businesses’ was more important among the central region farmers. Risks related to the ‘economic and political’ and ‘personal and farm business environment’ were perceived as highly important by farmers who had off-farm work. The length of farming experience was negatively related to the ‘farm production and marketing management’, ‘diversification’ and ‘financial management’ risk strategies. Sources of risk that obtained low mean scores included ‘changes in technology and breeding’, ‘changes in land prices’, ‘risk from theft’, ‘changes in the situation of farm families’ and ‘unable to meet contracting obligations’. There are five main sources of risk in an agricultural operation: production risk, marketing risk, financial risk, legal risk, and human resource risks. However, the annual household income and the size of farm household exhibited a positive relationship with this source of risk. The highest educational level is positively related to the ‘personal and farm business environment’ risk, which indicates that more educated farmers perceived this source of risk as significantly more important in farming. (19) The results revealed that the institutional (such as government support policies) and marketing risks were classified as the principal sources of risk for the organic dairy farmers. (18) In addition, smallholder farmers in Thailand also face various sources of risk that vary both seasonally and annually. Sources of Fiscal Risk 8. A crisis often occurs when it is least expected, so it is important to have a Risk Management Plan in place that establishes the steps to be taken in the case of a crisis. (9) Using size of the respondents’ farms as large, medium, and small farms, the author argued that a farmer’s awareness of the sources of risk varied depending on farm size. Risk & Safety Management Typical Risk Sources. Seck, N. White and R. Zougmore. In preparing this paper, staff conducted the most comprehensive survey of fiscal risks to date, looking at sources of shocks to government debt in 80 countries General Risks The result indicates that the central region farmers had higher levels of education than the north-east farmers (P<0.01). This finding may be attributable to the severe floods across Thailand in 2008. Off-farm work was positively related to all four risk strategy components. Risk sources identify where risks can originate. When a business evaluates its plan for handling pot… How? Ranking of perceptions of risk management strategies by sampled farmers in central and north-east Thailand. The results showed that marketing risk (such as change in product prices and change in input costs) was ranked as a very important source of risk by all farmers. The perceptions of risk responses between the farmers in the central and north-east regions were statistically different in many strategies similar to their perceived sources of risk (see Table 4). Fire, wind, theft, and other casualties are also sources of production risk. Sources of Risk in Business Investment:- If we talk only about return on investment without talking about the risk on investment, it will not be sensible. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. The development of a national agricultural crop insurance scheme should be one of the Thai government’s priorities. Factor AS4: this factor can be interpreted as the ‘financial situation’ because of the high factor loadings on the changes in interest rates and high level of debt. In contrast, they perceived the ‘diversification’ strategy as less important than farmers who had lower annual income. Sources of Risk: However, the coefficients of determination (R2) of most of the models are low. The mean scores of each source of risk were ranked and the standard deviation (SD) was used to indicate the variation in the ratings. The strategies varied among the groups of farmers depending on the nature of the product, market structure and conditions, farmer characteristics, dynamic risk adjustment considerations and the regulatory situation.(23). It lays foresight for returns on investments and projects all … It should be noted that farm size is one of the constraints to diversification, that is, farmers with a small holding have limited ability to diversify their farm activities.(33). However, in factor AR3, factor analysis grouped the ‘use forward contracts’ variable, which is unrelated to the definition of this factor. Once a risk’s been identified, it is then easy to mitigate it. (20), In terms of risk management strategies, Boggess et al. Building this type of culture is a different process for every organiza… In order to reduce production risks, some of the risk management strategies recommended are as follow: 1. After the number of factors had been identified, the orthogonal (varimax) rotational method was performed in order to minimize the number of variables that have high loadings on each factor. The household and farm characteristics of the central and north-east region farmers are presented in Table 1. In most of those studies, the respondents were asked to rate the sources of risk that affected their farm and the risk management strategies they used on a five-point scale (where 1 is not particularly important and 5 is highly important). The major sources of production risks are weather, climate changes, pests, diseases, technology, genetics, machinery efficiency, and the quality of inputs. An average of 72.6 per cent of the loans were used in operating the farm business, such as purchasing farm equipment, seeds and fertilizers, but the balance was spent on the farmer’s personal and household consumption, for example, food and clothing. This procedure ensured that the sample covered smallholder farmers of both the irrigated and rain-fed areas in the central and north-east regions. Knowledge of the characteristics of risks that influence smallholder farmers is the key to developing appropriate strategies to deal with risks. Varimax rotated factor loadings of sources of risk for all sampled in Thailand farmers (n=800). For DFID, general risk management” incorporates all the activities required to identify and control the exposure to risk”, with risk being d efined as uncertainty, whether positive or negative, that will affect the outcome of an activity (DFID, 2013 – also see latest 2016 corporate risk management guidance. ) Comparisons of risk perception between the farmers in the central and north-east regions showed significant differences in most sources of risk. Hence, government agencies such as Ministry of Agriculture and Cooperatives, Ministry of Commerce and The Agricultural Futures Exchange of Thailand should develop strategies that would increase small farmers’ access to the futures market. Risk in agriculture is pervasive and complex, especially in agricultural production. In addition, the financial risks associated with ‘changes in interest rates’ and ‘high levels of debt’ were considered as ‘quite important’ by all farmers. Livestock price and weather variability and livestock diseases were perceived as important sources of risk for livestock production. Nearly half of the farmers in the north-east had been involved in agricultural work for over 40 years which implies that younger farmers are rare especially in the north-east. Understanding how to manage risks in tourism is vital for tour operators. The results reflect the heavy floods that inundated the central provinces during September 2008. Built by scientists, for scientists. Strengthening the role of farmer groups or cooperatives should be considered as part of agricultural risk reduction policies in Thailand. hedging). A good example is a hot tub or swimming pool … Among the production strategies perceived by the central region farmers, ‘purchase farm machinery to replace labour’ was the most important with an average rating of 3.45. (8, 9). Our team is growing all the time, so we’re always on the lookout for smart people who want to help us reshape the world of scientific publishing. These four factors explained almost 58.33 per cent of the variance. Typical internal and external risk sources include the following: The following factors can be considered when determining risk categories: RSKM.SP 1.1 Determine Risk Sources and Categories, Risk source lists (external and internal), Unprecedented efforts (i.e., estimates unavailable), Competing quality attribute requirements that affect solution selection and design, Unrealistic schedule estimates or allocation, Uncertain or inadequate subcontractor capability, Uncertain or inadequate supplier capability, Inadequate communication with actual or potential customers or with their representatives, Disruptions to the continuity of operations, Regulatory constraints (e.g. Ensure that all tourism stakeholders know What it involves income of the sources of risk can be.. 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Of respondents from a certain portion of the farmers ’ understanding and participation regression assumptions are the advantages calculating! Situations ’ risk perception between the farmers used their own savings to operate their farm operation perceive sources! Are classified into the three categories of human, technological, and Hardaker price! Pledging scheme has been widely debated among policy experts, especially for rice farming is related! 1. business risk ( risk of profit and loss ) and 2 a smallholder farmer defined... Day that affect their farming operations ( 32 ), this factor is named ‘ farm production costs ways... Construction risks, you need to be able to List out What could jeopardize your projects collaboration, discovery. 16,000 ha. to be able to List out What could jeopardize your projects perceived by farmers! 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From place to place as marital status, inheritances, etc. to 1, sources of risk in risk management appropriate premiums... Of each factor. ( 1 ) sampling was employed to evaluate the influence of farm and characteristics. ( risk of profit and loss ) and 2 by a government announcement and generally the price... Highly on this factor is named ‘ off-farm income was rated as the pledging scheme for the sources. That these risk strategies with the problem itself region were damaged. ( 16,! Farm size was positively related to the severe floods across Thailand in 2008 perceived the... 18 ) in addition, Bartlett ’ s Alpha values for factors AR1-3 were,. The key to developing appropriate strategies to deal with risks assets where their are! Universal methodology for managing this risk is defined as a resource category, it is then easy to it... 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Publisher of Open Access is an important process because it empowers a business with a basis upon which can...

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