SÍNTESIS DE HALLAZGOS

There are many classifications of risk in the farm management literature. The traditional approach adopted in farm management research is to classify risk in relation to the factors that place farm businesses into risk. With some small differences, farm management scholars (Boehlje et al., 2005; Hardaker, 2004; Martin, 2005) basically classified the risks experienced by farm businesses into:

a) Production risks: This includes all the factors affecting the level, stability and quality of production. For example: climate (droughts, excessive rainfall, hail, wind), weeds, pests and deceases, and theft.

b) Market risks: This refers to the factors that affect the level and stability of input and output prices. These factors comprise domestic and international markets, consumer demand, trade barriers, exchange rates, and input costs.

c) Casualty and disaster risks: these factors relate to major catastrophic events such as earthquakes or the death of the farmer.

d) Social and legal risks: these are the risks associated with the actions of society, institutions and other business. Examples of these include: institutional risk; regulation risk; compliance risk; and contractual risks that can be linked to land use constraints or uncertainty in relation to future decisions if the land is not owned.

e) Human risks: These risks are associated with the factors that may result in labour not performing as expected. They include illnesses, death of staff or managers, availability and quality of labour force, and family issues. This risk factor is very important in the case of a single owned and operated dairy farm, in which only one person, the farmer, is in charge of the management and daily operation of the business.

f) Technology risks: Changes in technology can result in risks for farm business performance, as the benefits of acquiring new technology may not meet the expected result, or it can be adopted at the wrong time and become obsolete too soon.

g) Financial risks: These risks relate to the impossibility of a farmer to service their debt. Examples of financial risks include: changes in interest rates; finance availability; changes in land prices; and availability of funds.

h) Scale risks: The increasing reliance on economies of scale to sustain competitive advantage in agriculture may result in a risk for the operability of uneconomic small farms.

It is important to acknowledge that there are some small differences in the literature about how these risks can be clustered in a way that are useful to analyse farm management risk. Martin (2005) suggests that, traditionally, the farm management discipline has primarily focused on two risk sources: business risk, which comprises the sum of production and market risks and financial risk. However, Martin (2005) acknowledges that this two sided view of farm risk hides some of the other risks mentioned in the list above. Hardaker (2004) argues that the distinction between business risk and financial risk is important because it highlights the fact that the management of business risks is independent of the way it is financed. However, Kay, Edwards, and Duffy (1994) point out that in most farming businesses, production, market and financial risks and their management are interrelated. Thus, while business risks can be reduced through financing specific assets targeting the reduction of those risks, financial risks may increase as a consequence of an increment in the ratio of debt to equity.

Another way to classify the risks to which a farm business is exposed is to differentiate between tactical (or operational) and strategic risks. This categorisation recognises the importance of time in relation to risk and risk management. On the one hand, the relationship between risk and time is given by the decreasing capacity of making accurate predictions under an increasing time- frame (i.e. planning horizon). Relating to this, management decisions focused on the short-term usually involve less risk than decisions that involve longer time-frames. Tactical risk, therefore, refers to risk management decisions that are relevant to the short-term (e.g. one year) and strategic risk is concerned with decisions that involve the long-term (e.g. 5 to 10 years). On the other hand, both tactical and strategic relate to two different levels of farm management (Shadbolt and Bywater (2005). The difference between tactical and strategic management is well defined in the farm management literature; however, not much is mentioned about either in relation to the management of risk. Tactical management relates to the efficient acquisition and allocation of resources and is, therefore, about planning the production system to meet a defined market (Shadbolt & Bywater, 2005). In contrast, strategic management is more concerned about how value will be created for shareholders (Nell & Napier, 2005; Olson, 2011; Shadbolt & Bywater, 2005). Thus, decisions regarding strategic management are more related to the unknown than the known as it is the future of the farm that is put to the test (Shadbolt & Bywater, 2005). Because strategic decisions have a greater impact on the farm, any change in strategy implies an adjustment in the management decisions that occur at the tactical level (Olson, 2011; Shadbolt & Bywater, 2005). However, strategic decisions are made more infrequently than tactical ones. In this regard, Boehlje et al. (2005) suggest that in a turbulent environment, strategic risk is replacing tactical risk as it has a low probability of occurrence but a large impact on businesses if it occurs.