Agricultural  Risk and Risk Management Strategies

Nino Nadibaidze

Journal number 3 ∘ Nino Nadibaidze ∘
Agricultural Risk and Risk Management Strategies

Improving agricultural efficiency in a diverse agricultural landscape and developing new risk management tools are critical to the viability and sustainability of the sector. In addition to traditional risks, farmers face challenges from climate change, market expansion, rapid price changes and globalisation. The current pandemic and the pandemic crisis have shown the importance of a holistic approach to agricultural risk management. The article gives a systematisation of the risks for the farmer and presents the mechanisms for assessing and managing them. Risks are divided into 2 broad groups according to their origin - internal and external risks. Internal risks include production, human resources, financial and physical risks, while farming is independently affected by political, market, price and other agriculture-related risks. Risk identification is the first stage of risk management, followed by the stages of risk assessment, risk management and risk control. In practice, these stages are not part of a strictly coherent process, but are constantly interconnected.

The aim of risk assessment is to map the individual risks of the company as accurately as possible in order to be able to carry out appropriate risk management activities. There are many qualitative and quantitative methods for this. The economic significance of risks can be assessed using a risk matrix in which risks are represented by their probability of occurrence and amount of damage, and 4 different methods for managing them are considered in the following stage: Risk avoidance, risk mitigation, risk transfer and risk assumption.

At the end of the article, the complicated situation of farms in Georgia and the role of appropriate risk management to remedy the situation are discussed. The experience gained in developing and developed countries of the world is also interesting and useful information for Georgian farmers on effective risk management mechanisms.

Keywords: Agribusiness, agrarian risks, risk management in agriculture, climate change.

Jel Codes:Q10, Q13, Q15.

Economics and Business Referential and Reviewed International Scientific-Analytical Journal of Ivane Javakhishvili Tbilisi State University, Faculty of Economics and Business

ISSN 1987-5789 ESSN 2587-5426 doi 10.56079	Journal number 3 ∘ Nino Nadibaidze ∘ Agricultural Risk and Risk Management Strategies Improving agricultural efficiency in a diverse agricultural landscape and developing new risk management tools are critical to the viability and sustainability of the sector. In addition to traditional risks, farmers face challenges from climate change, market expansion, rapid price changes and globalisation. The current pandemic and the pandemic crisis have shown the importance of a holistic approach to agricultural risk management. The article gives a systematisation of the risks for the farmer and presents the mechanisms for assessing and managing them. Risks are divided into 2 broad groups according to their origin - internal and external risks. Internal risks include production, human resources, financial and physical risks, while farming is independently affected by political, market, price and other agriculture-related risks. Risk identification is the first stage of risk management, followed by the stages of risk assessment, risk management and risk control. In practice, these stages are not part of a strictly coherent process, but are constantly interconnected. The aim of risk assessment is to map the individual risks of the company as accurately as possible in order to be able to carry out appropriate risk management activities. There are many qualitative and quantitative methods for this. The economic significance of risks can be assessed using a risk matrix in which risks are represented by their probability of occurrence and amount of damage, and 4 different methods for managing them are considered in the following stage: Risk avoidance, risk mitigation, risk transfer and risk assumption. At the end of the article, the complicated situation of farms in Georgia and the role of appropriate risk management to remedy the situation are discussed. The experience gained in developing and developed countries of the world is also interesting and useful information for Georgian farmers on effective risk management mechanisms. Keywords: Agribusiness, agrarian risks, risk management in agriculture, climate change. Jel Codes:Q10, Q13, Q15.