The danger lies not in the risk itself, but in how it is handled. Preventive measures are in place to stop everything from going wrong.
Agricultural businesses should also practise risk management – hardly any other piece of advice has been so popular since the outbreak of foot-and-mouth disease, African swine fever, bird flu and the extreme market turmoil of recent years. The latest economic results for the past financial year 2023/24 show significant declines in producer prices, particularly for grain, rapeseed and milk. Despite isolated price increases for products such as potatoes and pork, there has been an overall decline of around 5% compared to the previous year. This illustrates how volatile agricultural markets are and how necessary it is to deal intensively with strategic risk management.
Modern risk management offers opportunities
It is therefore important not only to react to these price fluctuations, but also to develop resilient long-term strategies for your business. This is not just a matter of short-term damage control, but of actively shaping your own future. However, there is a tendency to overlook strategic issues. Yet this is precisely where the critical risks lie that can break an entrepreneur's back. The reasons for business failure have been studied extensively and are clear: 50 to 60% lie in the area of strategic risks. This makes it all the more important to identify the relevant risks and take preventive countermeasures.
Strategic risk management: learning from the future
Modern risk management is geared towards recognising weak signals and avoiding unpleasant surprises. The aim is not to eliminate risks completely – that is neither possible nor sensible. Rather, the focus is on consciously analysing uncertainties and incorporating opportunities and threats into decisions. After all, the dangerous thing about a risk is not the risk itself, but how you deal with it.
This means devising various future scenarios and systematically examining their potential impacts. Tools such as scenario analyses and creativity methods play a crucial role here. For example, you could start by conducting a simple SWOT analysis (strengths, weaknesses, opportunities, threats) to develop a basic understanding of your operational situation. Checklists can also be helpful in identifying potential risks. Similarly, the use of digital tools such as simulation software offers a practical solution to avoid overload. Such tools help you develop sensors for the unexpected and make informed decisions.
The grey rhino: don't ignore obvious dangers
A recurring problem in risk management is what is known as ‘risk blindness’. Farmers tend to focus on a desired scenario that fits into their own perception bubble and ignore alternative scenarios. The consequence: critical risks are not recognised or are addressed too late. In risk management, we talk about the grey rhino, which is slowly and obviously moving towards us – but which we conveniently ignore. According to the motto “It's always worked out fine before!”
The importance of scenario thinking
Farmers in particular are often caught up in their daily routine and do not take a holistic view of their business. A serious risk and opportunity analysis always requires an interdisciplinary discourse based on facts and sound methods that go beyond perceived truths. Above all, we should accept that nothing is inherently one way or the other, and therefore right or wrong. We must learn to think about future scenarios with an open mind and look beyond our own horizons.
The industry perspective: constructive dialogue and an interdisciplinary approach
In addition to methodological approaches, there is a need for open and fact-based dialogue between all stakeholders in agriculture. We need mutual appreciation and interdisciplinary exchange in order to overcome ideologies and blame.
Only in this way can sustainable risk management be established in the industry and greater risk awareness be achieved. However, such an approach also requires farmers to rethink their position, which is often perceived as that of victims. Instead of blaming politicians, retailers or consumers for current challenges, how about proactively seeking solutions and taking responsibility for shaping your own future?
Conclusion: Gain new understanding
Effective risk management is not an end in itself, but a necessity for meeting the challenges of an uncertain future. With the right combination of strategic thinking, methodological tools and constructive dialogue, you can not only minimise risks, but also exploit new opportunities.
Address the uncomfortable questions of the future and enter a new realm of knowledge. This is the only way to strengthen the resilience of agricultural businesses in the long term.
