Risk Management

Jump to section

• Overview & contents
• i. Important Notice
• 1. Executive Summary
• 2. A Note on the Name
• 3. The Market and the FMD Crisis
• 4. Foot-and-Mouth Disease as a Business Risk
• 5. The Production System
• 6. Herd Performance
• 7. SWOT and Competitive Position
• 8. Grazing, Land and Water
• 9. Unit Economics
• 10. Route to Market
• 11. The Five-Year Build and Its Gates
• 12. Funding
• 13. People, Security and Stock Theft
• 14. Compliance and Traceability
• 15. Financial Projections
• 16. Break-Even
• 17. Sensitivity and Scenarios
• 18. Risk Management
• 19. Implementation Timeline
• 20. Returns
• 21. Key Performance Indicators
• 22. Key Assumptions
• 23. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

18.1 The risks that matter

A foot-and-mouth outbreak on this farm is the risk that stops the business rather than damaging it. Movement controls prevent animals leaving the property, so weaners cannot be sold in the year they are ready while continuing to eat. It is managed by buying almost no animals, quarantining every incoming animal for 30 days, vaccinating under the national programme and recording it, maintaining stock-proof boundary fencing, and checking the state veterinary position before every purchase.

Price normalisation is the risk created by policy success. A fifteen per cent fall — roughly what effective national disease control would produce — takes Year 5 cash EBITDA from R112 000 to minus R190 000. It is managed by pricing the plan below the market from the outset, by holding weaning percentage as the only available defence, and by treating export market reopening as an offsetting opportunity rather than assuming one without the other.

Weaning percentage below plan is the risk with the highest return on attention. Four percentage points is worth R211 000 — nearly twice the Year 5 cash EBITDA. It is managed by bull fertility testing before every season, cow condition scoring at mating, a controlled 90-day breeding season, calving supervision within a defined window, and culling cows that skip a calf.

Grazing outrun by the herd is the risk that compounds. A herd that outgrows its veld overgrazes, condition drops, conception falls and weaning percentage goes backwards. It is managed by independent written confirmation of capacity before each expansion, stocking below 85 per cent of assessed capacity, and camp rotation with rest periods.

Grant funding not obtained is the risk to the capital structure. R3.40 million of the programme is competitive Blended Finance money against a scheme that Parliament reported as materially oversubscribed. It is managed by applying a full year ahead, through more than one participating institution, and by holding the herd at its current size rather than over-borrowing if the grant does not arrive.

18.2 Risks sized against the plan

18.3 Controls

• No expansion proceeds during an active foot-and-mouth outbreak within movement-control distance, regardless of whether every other gate condition is met.
• Every incoming animal is quarantined for 30 days in a camp distant from the main herd, with separate handling and equipment.
• Bulls are fertility tested before every breeding season, and cows are condition scored at mating.
• Grazing capacity is confirmed in writing by an independent assessor before each expansion, for the herd being created rather than the herd held.
• Every calving, mortality, treatment, mating, movement and sale is recorded on the day it happens.
• Breeding cows are not sold to cover a cash shortfall under any circumstance; weaners are sold earlier and culls harder.
• No distribution is made to the founder beyond the budgeted owner remuneration until cash EBITDA has been positive for two consecutive years.