Risk Management at Lithuanian Farms

Abstract

Market grounds organized business involves risks as a consequence of various factors. So rapidly changing market conditions, increase competition and intensify the need to evaluate and manage risk. If risk is not evaluated it can lead to loss or even bankruptcy. Agricultural business organizations are facing with risk more than other business sectors, because agricultural products and services are related to natural processes and biological assets: plant's and animal's diseases. Agriculture is particularly exposed to adverse natural events, such as insect damage and poor weather conditions, what negatively impact production. Agriculture is unique sector mainly because of these reasons: seasonality; agricultural products are more prone to damage; climate fluctuations; agricultural demand, supply and price fluctuations. So in agriculture it is very important to evaluate and manage agriculture risk, only then will be possible to make effective decisions on time. Risk analysis helps simultaneously identify threats caused by several types of risk, which leads to an increased efficiency of economic decision-making. In order to make effective decisions at farm, it is necessary identify the main factors of the farm risk and to find the most appropriate management measures.