Risk Management



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We have identified a list of short term and long-term risks and challenges that may pose serious threat to the organisation either in the short or long run. We have come up with possible mitigating measures to thepotential risks and challenges. The identified list of challenges, level of risk and possible mitigating measures are as follows :

 

Risk / Challenges Level Mitigation Measures
Farmers not honouring the commitment and not selling commodities to ABY Farmers LLP High

ABY Farmers has been very cautious about this risk, especially in the initial years of operations. To minimise this risk, couple of measures have been considered while designing the business model. They are

  • 5 Clusters in Adilabad and Asifabad districts were selected where the founders of ABY Farmers LLP have got very good working relations with the farmers for the past 15 years.
  • To minimise the time required for sensitisation and mobilization of farmers, ABY Farmers will be closely working with Farmer Producer Companies (FPCs) or Mandal Samakhyas (Federation of SHGs at block/sub district level
  • Collaboration with FPC promoting agencies in this area for smooth coordination among the staff/ team facilitating the farm activities with farmers
Delay in getting working capital for procurement of commodities High This will erode the credibility of ABY Farmers LLP. If inevitable, procurement of commodities will be taken up at the NCDEX terminals instead of village level centres and spot trading will be taken up.
Non-availability of warehouse facility Medium As ABY Farmers LLP will be using the warehouse space of government and private institutions, it is possible that storage may not be available in some critical times. To minimise this, ABY Farmers LLP will identify temporary storage facilities up to 20% of the total requirement at the village level. Simultaneously, ABY will temporarily lease few areas to act as central warehouses and subsequently construct own warehouses for meeting at least 10% of the total requirement in very critical locations once required funds are made available.
Price fluctuations during storage of commodity Medium
  • Several measures will be taken. To mention a few
  • Cut off bottom price will be fixed and produce will be sold as part of stop loss principle.
  • Part of the produce will be tied up for future trading, if available.
  • Tie up with processors in advance for a fixed price
  • Price Fluctuation Fund (PFF) will be created over the period to meet the price fluctuations
Traders/Institutions not honouring the payments or timelines Medium As far as possible, transactions will be made only with the reliable references. However, Agreements will include the payment delay clause and compensation for the delay
Processors not providing processing facilities Medium Category 2 list of processors will also be approached initially and norms will be noted with them in case category 1 processors fail to provide the facilities.
Market institutions purchasing partially against initial orders Low List of potential market institutions will be listed down and will be approached if the existing players could not meet their pre-orders.
Increase in operational costs leading to low/ negative margins Low Additional revenue sources will be explored to compensate the increase in operational costs incurred due to delay in procurement, processing and marketing operations and under utilisation team viz., providing consultancy services, increasing the service portfolio and servicing more clients etc.
Losses and damages due to unexpected fire/ theft/ transit accidents/ natural calamities etc Low Insurance coverage will be taken at all levels to minimise this type risk exposures.


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