Risk in marketing, Types of risk in marketing

2. 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. 3
• Uncertainty situation prevails when all the
possible outcomes of events are unknown,
then neither the probability nor the outcomes
are known.

4. 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. 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. 6
• Physical risk
• Price risk
• Institutional risk

7. 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. 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. 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. 10
• Reduction in Physical Loss
• Transfer of Risks to Insurance Companies
• Minimize of Price Risk

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

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3. Pilot Weather Based Crop Insurance
Scheme (WBCIS) – Kharif 2007 – 20 states.
4. Pilot Coconut Palm Insurance Scheme
(CPIS) – 2009-10.
5. Livestock Insurance Scheme – 2005-06 in
100 districts and regularized from 2008-09 in
additional 100 districts.

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• 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. 17
• An effective system of advertising may
reduce price uncertainty.
• Operation of speculation and hedging.