11 Nov Drought, Bushfires, Pandemic, US Election & China’s Trade Tariffs – are you prepared?

By Deb Purvis

Drought, Bushfires, Pandemic, US Election & China’s Trade Tariffs, some of these events have had us thinking much further into the future than perhaps we ever have before.

Scenario Analysis is a powerful tool to aid in decision making in the face of uncertainty.  It has long been used by government planners, corporate managers and military analysts.

The idea is that scenarios establish thinking about possible futures which can minimise surprises and broaden the thinking of decision makers into different possibilities.

I have worked on many with my clients.

• Can I afford to purchase part or all this land? Should I invest off-farm instead?
• I need to restock after the drought, should I purchase or breed up my stock? Or can I do a combination of both?
• I have been frosted again, are sheep a better option for my business?
• Should I purchase or lease that $1 million combine harvester or use a contractor?
• These grapes are not performing well, should I consider a different variety?

While it is important to consider these are short to medium term scenarios how often do you consider scenarios beyond the next 3-5 years?

For example, initially agriculture & related industries were shown to be some of the least affected industries by COVID-19, as illustrated by Deloitte Access Economics below.

Note: Figure charts jobs at risk (vertical axis), relative to period of expected peak impact; Source: Deloitte (3 April)

Industries that were impacted early and deeply include air transport, accommodation and recreation services.

Over time the impacts for agriculture have continued to evolve.  Some are positive and some are negative.  I think we can all agree that Australia’s agribusiness sector have some longer-term scenarios to consider that will build resilience against future disruptions.

What are some of the disruptions that you should be considering in your agribusiness that would ensure your success into the future?   Here are just a few that come to mind.

• Climate Change
• Interest Rates
• Market Disruption
• Supply Chain
• Input Security

Scenario Analysis, risk management and planning around these potential disruptions will build your resilience and ultimately enable your business to plan its response and have breathing room in the event of disruption.

If you have concerns that these may cause disruption to your business in the future, consider a Scenario Analysis.   They can minimise those surprises and encourage you to think about the different possibilities you could adopt in your business to build your resilience against future disruptive events.