Risk and uncertainty management in agricultural holding

Kuzman, Boris and Prodanović, Radivoj and Subić, Jonel (2017) Risk and uncertainty management in agricultural holding. In: Risk in the food economy – theory and practice. Institute of Agricultural and Food Economics - National Research Institute, Warsaw, pp. 133-147. ISBN 978-83-7658-681-6

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Abstract

The goal of the paper is to present improvements in decision-making processes under conditions of risk and uncertainty. The identification of the risk source and uncertainty, which affects the decision-making of farmers, is an important activity on which depends the achievement of better financial effects. Many decisions in the agriculture have the outcomes which are realized through the longer period, after the decision is made. The sources of risk and uncertainty in agriculture are varied, but it can be summarized in five areas of management: production and technology, prices and market, finance, legislation and employees. Risk management in agriculture is engaged in reducing the possibilities of unfavourable outcomes or alleviating its negative effects. Not every decision will be right every time, but decision-making under uncertainty is difficult. The decision can be improved by identification of possible events, assessment of values of its outcomes and variability. Decision tree, matrix profitability and cumulative distribution function can be used in choosing between the risky variants.

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