- Edem’s story
Edem is a farmer. He started his farm business soon after he was declared redundant at his work place and given a financial package about seven years ago. He loved farming and attended many National Farmers’ day award programmes when he was an employee. He intended going into farming when he retired. However, fifteen years to his retirement, his company folded up because of insolvency. After a few months’ unsuccessful search for a new job and seeing that he was running out of money, he decided to venture into farming, which had all along been on his mind.
Edem acquired twenty acres of land at Akatsi and farmed five acres for a start. He planted tomatoes, watermelon and pepper. The first three years were a shock; but for his passion for farming, he would have given up easily. The first year saw abundant rain that destroyed his crops; in the second year the rains did not come so he could not get much yield for his crops. He was desperate because his pocket was also drying up. In the third year, Edem had a bumper harvest. However, the smile on his face did not last because the pricing for his crops was a nightmare!
Edem visited a neighbour’s farm village a few days after disposing off his farm produce. For the three years that he had started his farm he had never been there though the man, in a spirit of good neighbourliness had invited him several times. In the course of their conversation, Edem poured out his frustrations. The man listened quietly till Edem was done, then he asked if he had done any risk analysis on farming before venturing into it. He was surprised at the question. The expression of surprise on Edem’s face made his neighbour burst into laughter. When Edem finally left his neighbour’s place, the schooling he had just had about risk and its analysis, brought scepticism into his mind about his farm business. Nonetheless his passion for it and the fact that he was already in the business persuaded him to continue.
- What is Risk?
Risk comes from not knowing what you’re doing”
– Warren Buffet
Risk concerning business is the chance that a business will be harmed, or experience an adverse security effect if opened to a danger.
Risk is a characteristic of any business initiative. Therefore, it is incumbent on any businessperson to do a risk analysis before venturing into any endeavour. A good knowledge of risk management is therefore necessary for running a successful business.
Edem’s lack of knowledge on risks associated with various business ventures, especially with farming, nearly cost him the business he so much cherished. A simple idea about risks concerning farming would have prepared him psychologically on what to expect when entering the business. Obviously Edem did not understand the nature of the business he ventured into. Many start-up business ventures have failed because the initiators plunged into them with the hope that they too can flourish because others had done so. Edem, on seeing and hearing other farmers and their success stories, never took the chance to get some ideas about the dark side of the venture.
If you see people who carry tomatoes to the market counting their money after the day’s sales and think that you can also do it, think again. It is good to anticipate possible risks, assess the potential impact on the venture and advance a plan to counter any adverse events.
A business that is fraught with risk will make the owner have sleepless nights worrying about crises due to the risk manifesting itself into reality. Risk is not fun, but it can typically be reduced if well managed
- How do you manage risk?
Risk management comprises the identification, assessment, mitigation, and monitoring of risk within a business.
A good risk management process helps a business leadership tackles the risks it faces. Risk management also examines how risk is connected to its impact on a business’s strategic goals. Risks emanate from various sources including natural disasters, accidents, financial uncertainties and or legal problems.
It is, however, important to determine the risks that may fit within the organization’s risk acceptance level and which may require additional controls and actions before they can be acceptable. Some risks will be accepted with no further action necessary. Others will be mitigated, shared with or transferred to another party, or avoided altogether.
A bit of knowledge on risk is necessary for anyone venturing into a start-up business. It will prepare him psychologically on what he wants to venture into and help stem the temptation to easily give up.