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How to approach risk management planning

Christina Winch for Progressive Dairy Published on 18 May 2020

Risks exist if there is something you don’t want to happen and it has a chance to happen. As dairy farmers, we face risks every day of every kind.

These risks can include being around the cows, having hired help, working with machinery, weather, surplus production, odor lawsuits and financial risks. Another way to describe risk is to consider the probability that some event will cause an undesirable outcome on the financial health of your farm. Short and sweet: It’s that undesirable outcome that hurts!



In the farm business management courses I teach, we talk about the importance of spending time sitting down doing bookwork and risk management planning. When sitting down to do some risk management planning, the first thing to do is to make a list of what possible events might cause some hurt. All farmers will have a few of the same items such as weather, low prices, machinery breaking down or someone getting hurt. Others may have additional events they choose to add to the list like odor lawsuit, neighbor’s disagreement, death of an older parent, divorce; the list can go on. Once the list is made, you need to look at the probability that the risk will happen. Depending on each situation, that probability will be different for each farm.

This nice chart by Geoff Benson from North Carolina State University provides a simple way to determine how to prioritize which risks to address first.

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There are five actions we can take to manage risk. They can be categorized into four categories: reduce, transfer, avoid, do nothing.

  • Action 1: We can reduce the probability the event will occur.

  • Action 2: We can reduce the impact if the event does occur.

  • Action 3: Transferring the cost of the undesirable outcome to someone else is another option.

  • Action 4: Avoidance is not really an option for farmers, because we are not going to stay away from the cows or machinery.

  • Action 5: The final choice is to do nothing and be ready for the consequences if something happens.

Covid-19 has brought to light the importance of risk management planning for farmers, not just on the financial side, but on all sides. You are not alone when it comes to risk management. Extension agents, college instructors, nutritionists and your banker are just a few people who can help you. The future of your farm depends on doing some risk management planning. Please do it for your farm and for agriculture. end mark


Christina Winch
  • Christina Winch

  • Dairy Producer
  • Fennimore, Wisconsin
  • Email Christina Winch