Looking ahead to 2021, some Canadian farm producers are wrestling with their relationship with risk. While 2020 was the year of COVID-19, recent years have also focused attention on risks associated with climate change, trade-partner disagreements and changing consumer demands.
How can producers deal with risk in challenging times? Eric Olson, national lead of farm management consulting with accounting and advisory firm MNP, says many clients wonder about this topic. Olson advocates an approach to risk management planning that starts with asking, exploring and answering these four questions.
What’s your tolerance for risk?
“The reality is, the business of farming is risky,” Olson says. “Farmers are used to risk and have more tolerance for it than most people in society. Among farmers as a group, though, different people have different comfort levels. That’s a good place to start the discussion.”
What risk are you most concerned about?
It could be a major drop in market prices, a no-crop year for grain farmers or a serious disease outbreak for livestock producers. And it could be more than one risk coming up at the same time. Is this risk part of a regular cyclical downturn, or is it a once-in-a-generation disaster? How likely do you think it is to occur, and how bad would things get if it did?
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