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The Importance of Managing Risk During Uncertain Times

By Mary Bowen, Kansas State University

 

COVID-19 has had a major impact on most businesses, including those in the food, agriculture and animal health industry. From global supply chain issues to the inability to conduct face-to-face meetings, companies have had to adapt and learn new ways to conduct business. Agribusinesses with strategic risk management processes have an advantage over those that do not plan for disasters and crises.

“Real enterprise risks don’t suddenly emerge; they are always there, sometimes hovering under the surface. They just get amplified when the environment changes suddenly or rapidly,” Dr. Vincent Amanor-Boadu, professor of agricultural economics at Kansas State University, said. “When we always keep our enterprise risks on our radar and assess them frequently against their potential triggers and exacerbations, we eliminate the surprise that comes with sudden environmental changes. We are able to see them long before they happen. Granted, we could not predict a pandemic. But if we could imagine any event, including human acts, such as war, no matter how low the probability is, and assess its impact on our operations, we would build into those operations safety levers that allow us to kick into action quickly should these events manifest.”

Developing the appropriate mindset would position the agribusiness sector to deal with other challenges that are sure to come, said Amanor-Boadu. Enterprise risk identification, assessment and management strategies should all be considered from input and ingredient suppliers, through processors and manufacturers, to distributors and retailers.

“I’m not saying we live in constant trepidation of bad things happening. Of course, not. What I’m saying is that we build robust organizations that have the slack necessary to absorb the sudden shocks that will come from time to time. And each shock should instruct us to shore up our ability to take the next bigger one. Managers and directors should be tolerant of the importance of these shock absorbers. They are insurance premiums we pay for increasing our resilience,” Amanor-Boadu said. “I knew a vegetable processor who operated from the perspective that there will be at least one bad production season every five years. He incorporated this into his planning and execution. He ‘paid’ for those bad years with accelerated performance in the good years. When and if the bad years occurred, he found his performance above where it could have been without this major risk to his operations being on his radar screen always, and paying the necessary premiums to provide the indemnity when the bad years came.”

There are several options to learn risk management tips and strategies, including webinars, professional development workshops and educational programs. Kansas State University’s Master of Agribusiness includes risk management strategies in courses throughout the program and how to effectively incorporate enterprise risk directly into an organization’s operations. Risk management is one of the real-world concepts students learn in the classroom and directly apply to their current employment situation. Amanor-Boadu and Dr. Allen Featherstone,agricultural economicsprofessor and Department Head, both teach courses on strategy and risk management for the Master of Agribusiness program.

“No one planned for COVID, but you have to continue to manage through it. This is a classic case where strategic risk management processes can help you prepare for many situations and be able to adjust as needed throughout the crisis,” Featherstone said. “The MAB program incorporates risk management strategies into the curriculum for students to adapt for their companies.”

The Kansas State University Master of Agribusiness online program designed for working professionals is currently taking applications our January and August cohorts. For more information on how the program can help your career or to participate in a professional development conference or international farm and agribusiness tour, please go to www.mab.ksu.edu, call 785-532-4495 or e-mail mab@ksu.edu.