Senwes Scenario April / May 2016 | Page 61

F UT UR E F O CUS ••• JENNY MATHEWS MOVING THROUGH RISK TOWARDS RESILIENCE BUSINESS IS ALWAYS A GAMBLE. IT INVOLVES A LOT OF GUESSWORK. THERE ARE FEW CER­ TAINTIES AND MANY POSSIBILITIES. NO ONE KNOWS WHAT IS GOING TO HAPPEN AN HOUR FROM NOW. THE BEST YOU CAN DO IS MAKE ASSUMPTIONS BASED ON WHAT IS ALREADY GOING ON … AND THEN YOU HAVE TO GO WITH YOUR GUT! – TONY MAN­ NING, BUSINESS CON­ SULTANT O nce again my kitchen scale stands centre stage on the counter. My khaki-clad men are peering at the result. Of course … its crop estimates time! My husband had taken one look at the cob and announced it weighed 220g. Both sons carefully strip the kernels off the cob, weigh them and are amazed, “How did you guess Dad?” He smiles, “I’ve been doing this for many years!” I used to wonder what the point of the exercise was, but I’ve also been in this business “for many years now”. And I have learned to respect the process. The adage is true: Knowledge is power. Much decision-making needs to be done before one crop is taken off the lands and budgeting, planning and purchasing is done for the next season. Donald Rumsfeld, past US Secretary of Defence, once said there are known-knowns - things we know we know; known-unknowns - things we know we don’t know, unknown-knowns - things we don’t know that we know, and unknown-unknowns - things we don’t know we don’t know! This is a wonderfully succinct way of describing the relationship between knowledge and probable outcomes and is also a good description of what farmers need to manage every year. Risk is about dealing with knowns, and unknowns. Actually, this is something which humans have dealt with ‘since forever’. Even early man out hunting a mammoth beast essential for the survival of his clan, faced risk as he planned and executed his hunt. Risk is comprised of two key elements: exposure and uncertainty. If there is one but not the other, there is no risk. Exposure implies you have something ‘on the line’ and a reason to care. Uncertainty explains itself – there are always unknowns in farming! Increasingly risk management has come to play a role in farming so the farmer can add yet another title to his package of required skill-sets: Risk Mana­ ger. In many ways this is essentially what my men are doing when they weigh the cobs. It’s not just about the weight of the cob, it’s about the calculations done to estimate the return they can anticipate off the land, and those decisions that are waiting to be made. Risk management is not a once-off process; it evolves as the environment ‘out there’ changes to respond to different stressors. Neither is it a one-size-fits-all action - every operation is unique. Risk management means you are looking at potential threats and choosing from a number of possibilities and options to reduce the risk on the farm. Including risk analysis into your business management is a strategy for improving the resilience of your business. It is also an act of hope and a statement of belief in the future of your operation. It shows you are prepared to tackle the problems and think strategically. Barack Obama said, “I have always believed that hope is the stubborn thing inside us that insists, despite all evidence to the contrary, that something better awaits us so long as we have the courage to keep reaching, to keep working, to keep fighting.” If you studied risk management, it is likely you have heard that the 4 key components of risk are the 4 T’s: Tolerate; Treat; Transfer and Terminate. • Tolerate – An important decision-making part of risk analy­sis is selecting which SENWES Scenario • Apr/May 2016 59