Don't get caught out!
Farmers, as you know, operate in a constant state of flux where different risks can affect the performance and in many instances the survival of the business. Needless to say, managing risks is a critical task for farm owners. It requires careful planning, and in most cases the contribution of specialist advisors across areas including accounting, taxation, legal compliance, wealth management and insurance protection.
This article highlights some of the key risks faced by farmers, provides simple steps to managing them, and details useful services offered by specialist advisors that will help you ensure business sustainability regardless of the business risks you currently face.
Step 1 - Identify your risks
The first step in risk management is to identify the areas of risk relevant to your business. Some of the key risks associated with farming businesses include:
- Commercial Risks – risks associated with the market and the sustainability of the business.
- Compliance/Legal Risks – relates to compliance with legal requirements and other regulations.
- Environmental Risks – issues including weather, temperatures, cyclones, storms, fires, floods, tsunamis and droughts; and other environmental risks like disposal of waste etc.
- External Risks – important risks over which the business has very little control including pricing fluctuations, market conditions (over/undersupply) etc.
- Fixed Asset Risks – damage, deterioration or obsoleteness of plant, equipment or buildings etc.
- Staff Disputes – interpersonal or structural.
- Infrastructure Risks – including communications failures (e.g. internet, telephone & satellite) or electricity failures etc.
- Safety Risks – safety issues affecting team members, customers and visitors to your premises.
- Stakeholder Risks – change of Directors, shareholders, management team and key suppliers.
- Technology Risks – keeping up to date with advancements in technology.
- Corporate Governance Risks – Directors and management understanding their responsibilities.
Step 2 - Quantify your risks
The second step in risk management is to quantify each risk and determine the cost of addressing that risk versus not addressing it. Not all risks warrant the expense of implementing avoidance strategies. Factors to consider in deciding what action to take include the likelihood that the risk will eventuate, and the worst-case scenario cost of the risk eventuating versus the cost of avoiding that potential risk.
From this cost-versus-benefit position, you can make strategic decisions about what risks you are going to proactively manage.
Step 3 - Create a risk management plan
The third step in risk management is to establish a strategy to address your key risks.
Establishing a system to oversee and manage risks can result in numerous benefits for your business. Not only can it act as a useful day-to-day operational tool, but it can also strengthen your business' culture, resulting in more rigorous decision making and improved resources allocation.
How Moore Stephens can help you manage your risks
At Moore Stephens we provide comprehensive, specialised risk management services to small, medium, and large organisations that include not only traditional Accounting services, but also things such as:
- Risk assessments
- Strategic business planning
- Key performance indicator development
- IT audit and security reviews
- Disaster/business continuity planning
Moore Stephens can also offer advice on personal and business insurances. MSQ Insurance Services is an Authorised Representative for NAS Insurance Brokers, one of Australia's largest insurance brokers with over 300 brokers nationally. With that strength behind us, we have access to the widest range of insurance products available at highly competitive pricing, allowing us to remain focused on your individual insurance requirements.
Moore Stephens also has a Wealth Management team who can provide specialist advice on a range of advisory and investment services to help you achieve your financial objectives. Managing over $800 million in client funds, our experts know the best ways to protect and grow your wealth, so that you can reap the maximum rewards for years to come.
We offer a flexible approach to servicing your needs, whether they be basic advice on managing your key risks or a complete accounting, wealth management and insurance solution. We are well recognised for keeping abreast of the rapidly changing business environment through our on-going commitment to professional education and research.
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2014 Moore Stephens Australia Pty Limited. All rights reserved.