Strategic Planning for Risk

by Dana L. Hoag, Colorado State University

All business owners make decisions that impact their bottom line. Making decisions is made harder when there is uncertainty about markets, production, or finances. Agricultural producers make more risky decisions than most business owners, but studies show that most of us don’t have a strategic plan to manage risks. Having a solid plan to manage risks softens the impact of lower yields, higher costs, or lower prices. The Strategic Risk Management Process (SRMP) is specifically designed to help producers manage their risks.

The SRMP was developed by the RightRisk Education Team. The team is spearheaded by a group of experienced extension economists who understand the special needs of agricultural producers in the West. The team’s comprehensive risk management program includes a Web site (, the SRMP 10-step risk management program, an extensive risk management library, and a realistic risk-simulation program called AgSurvivor. The Team offers risk management education through the Web site, a variety of publications and workshops offered in Colorado, Wyoming, Utah, Idaho, Montana, Arizona, and many other states. Both the SRMP and RightRisk are summarized within these pages. For full details and a schedule of workshops in your location, visit the RightRisk Web site at

The SRMP process is divided into three main parts: strategic, tactical, and operational. These parts are further divided into 10 specific steps for the management of any operation. The process is cyclical, with feedback and reevaluation as conditions change. The circle reminds us that risk management requires continuous evaluation and adaptation. Management decisions are based on the operation’s goals, actual performance, and consideration of current and future conditions, which are affected by risk.

Patterned after strategic management, the first three steps involve using your ability and preference to tolerate risk to set risk management goals. Your tolerance for risk will depend on your financial health and personal preferences. The middle steps are tactical, which includes identifying risks and the outcomes for various management actions, determining the likelihood of each outcome, and making an informed decision about how to manage any risks. The operational stage assures that what was done was evaluated and reconsidered, and the process is repeated with course corrections.

SRMP teaches producers about risk and includes innovative computer tools to help you complete each step on our Web site. AgSurvivor gives you an opportunity to test your newfound skills by managing realistic risks in a realistic setting without risking real money. There are several versions of the AgSurvivor simulation to cover a variety of diverse farming and ranching operations and risk scenarios. Read on to find out more and watch for updates on our Web site as we grow.