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Introduction to the Human Resource Risk Pillar of Your Farm Business

This is an introduction video for the Human Resource pillar in the “5 Pillars of Risk Management” series. Of all the risks that are associated with the farm business, human resource risk is the most important. Studies have shown that at least 80% of businesses do not transfer because of a communication or conflict issues, therefore it’s essential for you to ensure you understand the human resource risks on your farm operation.

Though large corporations have human resource departments and realize that this is a much needed component of their business, farmers often go at it alone without any human resource background at all. From employee reviews to how to navigate your way through the growth of your farm business, having a human resource plan in place can be a very valuable asset.

Watch Reg Shandro explain what a human resource risk is and what you can do to minimize it on your farm operation.

This workshop was funded in part by the Agriculture & Food Council of Alberta

Mitigating the Risks of Shareholder’s Loans in Your Farm Business

In any farming operation, whether incorporated or sole proprietorship, capital has to be put into the operations.

One sitution with an incorporated farm is when capital is required and a shareholder contributes assets or cash, sometimes the consideration that comes back to the shareholder is a shareholder loan (i.e. the farming operation owes the shareholder money). Therefore, it is prudent for the shareholder to become a secured shareholder, meaning they secure the loan the farming operation owes. This is important so that in the event the farm business needs to pay off creditors, the debt owed to the shareholder is secured, and thus will be paid off before any unsecured debts.

It is essential to remember that the key to mitigating any risk is to understand that you’re running a business. Even though it is your farm operation, it is still a business, and just as a prudent business person would want to secure a loan given to a corporation, you should also make sure you’re loan is secured when loaning to your incorporated farm.

Watch Tracy Hanson explain how to mitigate the risks of shareholder loans to your farming operation.

This workshop was funded in part by the Agriculture & Food Council of Alberta


Mitigating the Risks of Shareholder Loans in your Farm Business

 

The Benefits and Risks of Different Legal Structures for Your Family Farm

If you’ve ever wanted a simple explanation of the basic legal structures for a family farm, look no further. In under 5 minutes, Tracy Hanson, lawyer at Walsh LLP in Calgary, expertly explains and discusses the benefits and risks of sole proprietorships, partnerships, and corporations for a farm business.

Sole Proprietorship

This is when a person owes the farm business and controlles the assets. All of the income and expenses remain with the individual. From a risk perspective, if there are financial problems with the farm business, this will affect the assets that the individual owns.
Partnership 

A partnership is a separate entity for all purposes but income tax. A partnership is a relationship that exists between two or more people. The risk associated with a partnership is that the partners are liable for the partnership debts. The benefit of a partnership can come from the perspective of some tax and succession planning.
Incorporation 

Incorporating your farm business provides the greatest amount of risk protection. With incorporation, the assets are separate from ownership of the farm business. The incorporated farm is a separate entity, which carries on the business and carries the business risk. As a shareholder of the business, you are not liable for the debts of the company itself. However, from a financial perspective, financial institutions will require a personal guarantee by the shareholder so it doesn’t necessarily move financial risk away from the shareholders.

The best structure for your  farm business depends on what stage the business is at and succession planning.
For further information on legal organizational structures and the benefits and risks associated with them, please refer to the following:

Legal Organizational Structure by Agricultural Marketing Resource Center

So You Want to be a Farmer? (p.17-19) by Canadian Farm Business Management Council

This workshop was funded in part by the Agriculture & Food Council of Alberta

 

Wrapping Up the 5 Pillars of Risk Management

Reg Shandro wraps up the ‘5 Pillars of Risk Management’.

It’s important to note that there has to be a balance between the different pillars of risk. However, you must also remember that with the 5 different pillars, the lowest common denominator risk will be the limiting factor on your farm operation. For example, if you have the best production in North America but you have an extremely poor marketing plan, then there is a major risk to the profitability of your farm operation.

So, it is critical to identify the 5 areas of risk on your farming operation and see if you can bring up the level of all 5 pillars to help mitigate risk and improve your farm operation.

One way to think about all of this is, rather than thinking about how much money you can make, think about how much money you stand to lose.

This workshop was funded in part by the Agriculture & Food Council of Alberta

 

Managing Your Human Resource Risk

When you’re in a farm operation there are a number of different risks and in order to be successful as a farmer you need to understand:

1. What the risks are;

2. The potential for problems with the risks;

3. How to alleviate the risks to an acceptable leve

To understand the whole picture you need to educate yourself and then consult professionals to help you out.

‘Human Resources Risk’ is one of the ‘5 Pillars of Risk Management’, as explained by expert Reg Shandro.  In farm families the complexities of managing human resources can be risky business!

For further resources, please read the information below or in the “download” section on the right of your screen:

Conflict Resolution Skills
This workshop was funded in part by the Agriculture & Food Council of Alberta

 

Risk and Return in Agriculture: An Intro to Risk Management

In essence, risk management means that the higher the risk, the higher return. However, in reality, risk managment in agriculture is somewhat different.

Watch Reg Shandro introduce the concept of risk management in yourfarm business.

What is risk management in agriculture?

The agriculture industry is unique with a different set of risks and rewards compared to other industries.  If you want to be successful you must know how to manage the risk to maximize your returns.

This workshop was funded in part by the Agriculture & Food Council of Alberta

 

 

The Production Risk Pillar

Production is what farmers know best. However, it never hurts to hear some needed advice from the experts.

Production risk exists in weather, in yield, in quality, in expansion of the farm operation, rotations, seasonality, government programs and more.

Watch Reg Shandro explain the production risk pillar of the ‘5 Pillars of Risk Management’.

For more information about production risk check out this excellent guide by Utah State University: Managing Production Risk in Agriculture
This workshop was funded in part by the Agriculture & Food Council of Alberta

 

Managing the Market Risk on Your Farm

Watch Reg Shandro explain how to manage market risk on your farm.

Managing market risk can look like black magic to anyone who doesn’t understand it. That’s where hiring a professional comes in but there are some basics you should understand as the decision maker in your farm business.

For further resources, please read the information in the “download” section on the right of your screen.

This workshop was funded in part by the Agriculture & Food Council of Alberta

 

Managing the Legal Risks in Your Farm Operation

‘Legal & Organizational Risk’ is one of the ‘5 Pillars of Risk Management’, as explained by expert Reg Shandro.  It’s an area that many of us avoid but you don’t have to be a lawyer to understand its importance.

What risks exist within the legal structure of your farm? One of the most important risks to look at, in terms of legal risks, is safeguarding your assets. Get legal help to learn what you can do to protect your farm business assets.

For further resources, please read the information below or in the “download” section on the right of your screen:

Legal Organizational Structure for Your Farm Business
This workshop was funded in part by the Agriculture & Food Council of Alberta

 

Introduction to the Financial Risk Pillar of Your Farm Operation

As a farmer, you need to understand your farm finances in your operation so that you can mitigate risk.

There are three main things that you should be aware of:

  1. Profitability:The first thing to understand is whether your farm business is profitable. You need to be able to make an operational profit, or you cannot farm. It’s as simple as that.2. Assets: Number two is that you need to protect your assets.

    3. Role as a farmer: Number three is that you need to clarify your job as a farmer. We sometimes confuse what we like to do, with our role as a farmer. However, “like” doesn’t feed your family.

    There’s a rural myth that by working hard, you’re making money. However, it’s essential to take a step back from the hard work, and really try and understand your numbers. Think about it this way – would you ever accept the terms of conditions of employment, in which you work all year and then pay your employer money to have that job?

    WatchReg Shandro introduces the financial risk pillar of the ‘5 Pillars of Risk Management’ and tell you what to look out for.

    This workshop was funded in part by the Agriculture & Food Council of Alberta