Risk in marketing, types of risk in marketing

Risk in marketing,
Types of risk in marketing

1. Risk in Marketing

2. Risk 2 Risk is defined as a situation when all possible outcomes are known for a given management decision and probability associated with each possible outcome is also known . Risk is measured through probability concepts.

3. Uncertainty 3 Uncertainty situation prevails when all the possible outcomes of events are unknown , then neither the probability nor the outcomes are known .

4. Risk in Marketing 4 Risk is uncertain about cost, loss or damage . Risk is inherent in all marketing transactions . There is risk of the destruction of the produce by fire , rodents or other elements , quality deterioration , price fall , changes in tastes , habits or fashion and the risk of placing the commodity in the wrong hands or area .

5. Risk in Marketing 5 There is a time lag between the production and consumption or farm products. Longer the time lag , greater the risk . The risk associated with marketing cannot be dispensed with for this risk contributes to profit. Most of the risk is taken by market middlemen

6. Types of Risk 6 Physical risk Price risk Institutional risk

7. Physical risk 7 This includes a loss in the quantity and quality of the product during the marketing process . It may be due to fire , flood , earthquakes , pest and diseases , careless handling and scientific storage , improper package , looting .

8. Price risk 8 The prices of agricultural products fluctuate not only from year to year, but during the year from month to month, day to day and even on the same day. The changes in prices may be upward or downward . Price variation cannot be ruled out , for the factors affecting the demand for, and the supply of, agricultural products are continually changing . A price fall ma cause a loss to the trader or farmer who stocks the produce.

9. Institutional risk 9 These risks include the risks arising out of a change in the government’s policy , in tariffs and tax laws , in the movement restrictions , statutory price controls and the imposition of levies .

10. Minimization of risk 10 Reduction in Physical Loss Transfer of Risks to Insurance Companies Minimize of Price Risk

11. Reduction in Physical Loss 11 Use of fire-proof materials in the storage structures to prevent accidents due to fire. Use of improved storage structures and giving necessary pre-storage treatment to the product to prevent losses in quality and quantity arising out of excessive moisture , temperature , attacks by insects and pests , fungus and rodents .

12. Reduction in Physical Loss 12 Use of better and quicker transportation methods and proper handling during transit. Use of proper packaging material . Use of cool chain for perishable commodities .

13. Transfer of Risks to Insurance Companies 13 The burden of physical risk may be minimized by shifting it to insurance companies . The GOI, through Agricultural Insurance Corporation (AIC) is implementing a massive agricultural insurance programme for farmers.

14. Transfer of Risks to Insurance Companies 14 GOI in the 12 th five year plan launched Integrated Scheme for Farmer’s Income Security (ISFIS) by integrating various on-going insurance schemes. National Agricultural Insurance Scheme (NAIS) –1999-2000 – 24 states & two Union Territories. Pilot modified NAIS (MNAIS) – 2010-11 – 50 districts.

15. Transfer of Risks to Insurance Companies 15 Pilot Weather Based Crop Insurance Scheme (WBCIS) – Kharif 2007 – 20 states. Pilot Coconut Palm Insurance Scheme (CPIS) – 2009-10. Livestock Insurance Scheme – 2005-06 in 100 districts and regularized from 2008-09 in additional 100 districts.

16. Minimize of Price Risk 16 Fixation of minimum and maximum prices of commodities by the governments and allowing movements in prices only within the specific range. Making arrangement for the dissemination of accurate and scientific price information to all sections of society over space and time.

17. Minimize of Price Risk 17 An effective system of advertising may reduce price uncertainty. Operation of speculation and hedging .

18. THANK YOU! Dr.M.Sathaiah , Assistant Professor ( Agrl.Economics ), CAT,Theni