There are five main sources of risk in an agricultural operation: production risk, marketing risk, financial risk, legal risk, and human resource risks. Only about four per cent had loans from commercial banks. Contact our London head office or media team here. Multivariate regression of the source of risk components and household and farm characteristics of all sampled Thai farmers (n=800) a. Comparisons of risk perception between the farmers in the central and north-east regions showed significant differences in most sources of risk. The development of the plan should follow a clear process, to ensure that all tourism stakeholders know what it involves. There are two types of risk available: 1. Business risk (Risk of profit and loss) and 2. Farmers in both regions perceived ‘unexpected variability of input prices’ as the most important sources of risk on the farm. After establishing the context, the next step in the process of managing risk is to identify potential risks. 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. The undesired event and/or condition 2. It’s based on principles of collaboration, unobstructed discovery, and, most importantly, scientific progression. © 2012 The Author(s). This implies that the more educated farmers perceived these risk management strategies as highly important. However, the north-east farmers perceived the importance of ‘holding cash and easily converted cash assets’ significantly higher than the central region farmers. Risks management is an important process because it empowers a business with the necessary tools so that it can adequately identify potential risks. (35-37) The advantage of the rice pledging scheme is that farmers can obtain low-interest loans from the government when they decided to pledge their rice to the Bank of Agriculture and Agricultural Cooperatives (BAAC) at the pledging prices and the rice will be transferred to storage at the Public Warehouse Organisation. 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. A smallholder farmer is defined as a farmer who has a farming area less than 30 rai (4.8 ha). Crop insurance is, theoretically, an efficient instrument in managing risks and can facilitate efforts to protect farmers from either the loss of their crops or farm income caused by natural disasters or drops in commodity prices. and Meuwissen et al. The alpha value for factor AR4 was 0.596, which is very close to the minimum cut-off level of 0.6. The KMO measure of data sufficiency was 0.779 and the Bartlett’s Test of Sphericity achieved statistical significance (χ2 = 4927.58, P<0.01), both indicating that the data set was appropriate for factor analysis. Typical risk sources include: [1] Threat: The sensitivity of the program to uncertainty in the threat description, the degree to which the system design would have to change if the threat’s parameters change, or the vulnerability of the program to foreign intelligence collection efforts (sensitivity to threat countermeasure). However, in factor AR3, factor analysis grouped the ‘use forward contracts’ variable, which is unrelated to the definition of this factor. Table 1 shows that except for gender, household size and finance used for the farm business, central and north-east region farmers generally differ in terms of personal and farm characteristics, and income distribution. However, the coefficients of determination (R2) of most of the models are low. In this section, the results of the factor analysis of sources of risk and risk management strategies are discussed. The respondents were grouped into five types of farm; mixed farming; cotton; corn, soybean and hogs; small grain and ranch. Risk sources identify where risks can originate. The mean scores of each source of risk were ranked and the standard deviation (SD) was used to indicate the variation in the ratings. However, this scheme has recently been terminated due to limited government budget and this consequently reduced opportunities for the farmers to control production costs. The sources of information available include farm records, off-farm statistics, information from input dealers, traders, extension workers and other farmers and market price data. This finding may be attributable to the severe floods across Thailand in 2008. A part of risk management is a determination of risk versus reward. Varimax rotated factor loadings of sources of risk for all sampled in Thailand farmers (n=800). 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 In addition, Cronbach Alpha was employed to evaluate the internal consistency of each factor.(28). 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. Publishing on IntechOpen allows authors to earn citations and find new collaborators, meaning more people see your work not only from your own field of study, but from other related fields too. 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. 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. Evidently, the small farm business may be affected in different ways by changes in these sources of risk. By Satit Aditto, Christopher Gan and Gilbert V. Nartea, Submitted: December 12th 2011Reviewed: June 2nd 2012Published: September 12th 2012, Home > Books > Risk Management - Current Issues and Challenges, Risk Management - Current Issues and Challenges. The results reflect the heavy floods that inundated the central provinces during September 2008. Further, 30 per cent of the farmers in the north-east had outstanding debts of less than 30,000 baht during the 2008 crop year. (24) Similarly, Flaten et al. As part of this process you must look at the following sources: Sources Description Risk registers and risk reports Provide a foundation for evaluating existing risks and their potential risk to an objective. 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. Risk sources are both internal and external to the project. Factor two (AR2): this factor is described as ‘diversification’ because there were significant loadings of risk strategy variables related to ‘having diversified crop, animal or other enterprises’, ‘planting several varieties of crops’ and ‘selection of crop and/or animal varieties with low price variability’. Direct access to futures trading markets may perhaps be too complicated for smallholder farmers in Thailand. 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). However, the pledging scheme has been widely debated among policy experts, especially for rice. They rated ‘storing feed and/or seed reserves’ as the most important production strategies and ‘having a farm reservoir for water supplies in dry season’ was ranked third with mean ratings of 3.61 and 3.47, respectively. Risk management strategies are the tactics for dealing with these risks and understanding their potential consequences. Low premiums may not always cover all the losses from the large-scale disasters, but the high insurance premiums will lead to increased farm production costs. A good example is a hot tub or swimming pool … (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. Thus, this factor is classified as ‘yields and product prices’. This observation proves that there is no universal methodology for managing this risk. HeadquartersIntechOpen Limited5 Princes Gate Court,London, SW7 2QJ,UNITED KINGDOM. This suggests that the agricultural production under forward contracts in Thailand is still in its developmental stages and is not popular among the smallholder farmers in rural areas. A. Farm size was positively related to the ‘diversification’ strategy. In contrast, they perceived the ‘diversification’ strategy as less important than farmers who had lower annual income. Pure risk (Insurable risk like fire, injury due to accident etc.) (3, 4) The sources of risk and level of its severity can vary according to the farming systems, geographic location, weather conditions, supporting government policies and farm types. Multiple regression was employed to evaluate the influence of farm and farmer characteristics on the smallholder farmers’ risk perception and risk management responses. They are defined by: 1. As shown in Figure 1, the knowledge risks can be classified into the three categories of human, technological, and operational. Similarly, 27 per cent of the farmers in the central region had debts between 31,000-50,000 baht. A nationwide mail survey was used to examine the sources of risk and the risk management strategies of New Zealand farmers by Martin(23). Factors AS1‐6 can be labelled in accordance with the significant loading variables that were obtained for each factor and explained as follows: Factor AS1: this factor is named ‘economic and political’ because of the relatively high loadings on the sources of risk variables with the changes in Thailand and the world economic and political situations and changes in the government laws and policies that affected the small farm operations. Similarly, the costs of farm inputs also vary each year and may negatively affect farm production costs. Open Access is an initiative that aims to make scientific research freely available to all. The authors’ results showed that rice farmers in Payao faced five major sources of risk including ‘outbreak of rice disease’, ‘insects causing damage to rice’, ‘high input costs’, ‘flooding’, and ‘shortage of water supply’. Flaten et al. The results showed that most respondents defined risk as the probability of a negative outcome. compared risk perception and the risk responses of conventional and organic dairy farmers in Norway. This result is consistent with the findings of Flaten et al. 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. Strategic risk is multidimensional while tactical risk has an identifiable one-to-one exposure such as price risk to futures contract (i.e. 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. (19, 24) Both authors argued that the lower R2 in the regression models implies that the farmers’ perceptions of sources of risk and risk strategies differed from farmer to farmer. As the project progresses, additional sources of risk can be identified. Sources of Risk and Risk Management Strategies: The Case of Smallholder Farmers in a Developing Economy, Risk Management - Current Issues and Challenges, Nerija Banaitiene, IntechOpen, DOI: 10.5772/50392. (39) Some economists also suggested that the government should discontinue this highly-interventional price policy and should encourage farmers to sell their products using futures contracts to reduce the risk of price and income volatilities. Ch. Return on investment and business risk always move together and at any stage of your business life cycle, your return may turn into loss. By making research easy to access, and puts the academic needs of the researchers before the business interests of publishers. There are many potential sources of project risk. 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. ) The respondents ranked rainfall variability, pests and diseases, and crop price variability as the primary sources of risk for crop production. Satit Aditto, Christopher Gan and Gilbert V. Nartea (September 12th 2012). and Patrick et al. However, empirical studies on farmers’ responses to risks and how risk affects farmers’ income, especially in rural Thailand are limited. (2, 5, 6) The types and severity of risks that farmers face differ from place to place. (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. In 2008, the central farmers had an average net farm income of 166,445.05 baht/household, whereas the average net farm income of the north-east farmers was only 42,632.80 baht/household. This suggests that the farmers who have a lower net farm income believe that these risk strategies can help to increase their farm income. Risk identification requires knowledge of the organization, the market in which it operates, the legal, social, economic, political, and climatic environment in which it does its business, its financial strengths and weaknesses, its vulnerability to un… who found low explanatory power of regression models between the perceptions of sources of risk and risk strategies with the farmers’ characteristics. Institutional risks related to ‘changes in Thailand’s economic and political situation’ and ‘changes in national government laws and policies’ were ranked third and fourth, among the north-east region farmers, respectively. 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. Factor three (AR3): this factor is loaded highly on ‘investing in non-farm investment/business’ and ‘working off farm to supplement net farm income’, which represent the influence of off-farm income. Before performing multiple regression analysis, all models were assessed for normality, linearity, multicollinearity and homoscedasticity to ensure the appropriateness of the equations.(29). In addition, the financial risks associated with ‘changes in interest rates’ and ‘high levels of debt’ were considered as ‘quite important’ by all farmers. Boggess, Anaman, and Hanson examined farmers’ awareness of risk in crop and livestock production in northern Florida and southern Alabama. Once a risk’s been identified, it is then easy to mitigate it. The results of the sources of risk perceptions, showed that ‘unexpected variability of product prices’ was the second most important source of risk among the central and north east region farmers. This technique enabled the researcher to manage and reduce the number of original variables into a smaller group of new correlation dimensions (factors), which are linear combinations of the original variables. In addition, approximately 63 per cent of the central region farmers worked off-farm, which was significantly more than for the north-east farmers (P<0.01). The reason is because the more educated farmers realized that the family farm situation and the changes in farm business environment, such as high labour wages and relatively high prices of agricultural land, may indirectly affect their farm operations. A clear process, to ensure that all tourism stakeholders know What it involves with more than half the... 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sources of risk in risk management

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