A whole-farm approach to risk management
Risk management sounds hopeful, doesn’t it? It means taking steps now to avoid downfalls in the future. On farming operations, it can mean the difference between weathering a storm (figurative or literal) or going under.
“Farming itself comes with myriad challenges, and agritourism adds its own unique challenges,” added Dr. Doolarie Singh-Knights, associate professor and Extension specialist with West Virginia University, at the most recent International Workshop on Agritourism. She presented “Reading the Agritourism Operation – Tools for Whole-Farm Planning and Risk Management.”
Besides actually drawing visitors to your farm, agritourism has a goal of educating those people as well. Singh-Knights said farm-based education is among the most effective and promising forms of environmental, experiential and place-based education because of the innate ability in people to connect to farming.
But educating yourself on agritourism as a farm diversification strategy must come first. Singh-Knights said you can define it in three ways:
- As a supplementary enterprise, a minor activity that supports other products on the farm (such as school tours)
- As a complementary enterprise, sharing equal footing with other enterprises in the farm’s product mix (such as an apple orchard selling to a wholesaler and the remainder to U-pick customers)
- As a primary enterprise, the dominant activity on the farm – the largest income driver
“Agritourism tends to cannibalize the farm. It becomes its own beast,” she said. “Put it in its place” by defining its role on your operation.
Singh-Knights also outlined what farmers should consider for the feasibility of a new or alternative enterprise, which are myriad: economic feasibility; new knowledge, skills and practices needed; market feasibility; cash flow timing and capital items needed; rules, regulations and licenses; the impact on your business and personal goals; and managing business risks and customer expectations.
“Risk is any force that will impact a business’s ability to achieve its strategic goal,” she said. “But risk is not always bad. You need to take a chance to advance. Risk is what makes it possible to make a profit. Just look before you leap.”
Part of that look means asking what perspective you’re using. Is it sustainable, systems-focused, customer-centric or a risk management perspective?
A sustainable perspective centers on people, profit and the planet. A systems perspective focuses not on distinct parts but on a business’s interrelated parts – agronomy, production, business management, environmental resources, social resources, etc. The customer perspective can be tricky, as it’s skewed by different expectations.
The risk management approach is rooted in sustainable practices, according to Singh-Knights, including profitability, environmental stewardship and community connections. It takes into account every possible risk for an agritourism operation and at least has a plan for how to handle it, from financial, marketing, legal and human resources risks to environmental and production risks – the last of which, Singh-Knights noted, are plentiful, especially timing. There’s nothing like planning a cherry blossom festival, for example, and then receiving a late frost that wilts your plans.
“Which approach is best? There is no one-size-fits-all,” Singh-Knights said. “You need to prioritize your risks to ‘farm-tune’ your approach” – also known as fine-tuning an approach for your specific farm.
She added that a comprehensive approach to risk management helps both to mitigate possible negative impacts and benefit from potential rewards in taking calculated risks. A whole-farm risk management process starts by assembling a “farm team” to discuss the benefits of it and the process by which it will happen.
Next, Singh-Knights recommended using a risk assessment spreadsheet and a priority ranking tool. West Virginia University Extension offers templates of these which list five categories of whole-farm risks, with priority ranking based on the degree of risk (its frequency and its magnitude) and the preparedness of farm managers to manage said risk.
“The Excel rubric on the West Virginia Agritourism Initiative website results in a risk priority matrix, where you can identify risks, then make plan to address them,” Singh-Knights said. (See the website at agriculture.wv.gov/ag-business/agritourism.) “This tool can be used by any agribusiness enterprise at any stage of business development,” she added.
Once the risk management plan is in place for the whole farm, the team needs to continually implement, monitor, evaluate and improve it. And while this presentation zeroed in on agritourism, that is true of any agriculture enterprise.
by Courtney Llewellyn
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