Approaches to risk management of farmers

Risk can be categorized as production, marketing, financial, human and institutional. Production risk stems from uncertainty of factors that affect the quantity and quality of farm produce. Marketing risk exists because of the variability of product prices and the uncertainty of future market prices. Financial risk occurs when money is borrowed to finance the farm business. Institutional risk occurs because of unpredictable changes in the provision of services. And human risk refers to the risks to the farm business caused by human illness and the personal situation of the farm family. Strategies have been developed to cope with all types of risks. Often farmers experience the threat of different types at the same time. Risk reducing strategies are often used in combination with one another, because no single strategy can cover all of the risk likely to be encountered. Farmers need to consider the risks simultaneously and to develop an integrated approach for better management. They need to recognize the advantages and disadvantages of each risk management option both individually and in combination. Individual farmers should select an appropriate strategy based on their goals, attitudes towards risk and their personal and financial situations.