How do you manage institutional risks?

1 Assess the context

Before you enter a new market, expand your operations, or invest in a new venture, you need to understand the institutional context of your target location. This means identifying the relevant policies, laws, regulations, standards, norms, and practices that affect your agribusiness activities and objectives. You also need to analyze the potential threats and opportunities that these factors pose, as well as their likelihood and impact. A thorough institutional risk assessment can help you make informed decisions, avoid costly mistakes, and mitigate potential losses.

3 Adapt to changes

Institutional risks are dynamic and unpredictable. They can change rapidly due to political, social, or economic events, such as elections, conflicts, protests, or crises. To manage institutional risks effectively, you need to be flexible and adaptable to the changing environment. This means monitoring the trends and developments that affect your agribusiness, anticipating the possible scenarios and implications, and adjusting your strategies and plans accordingly. You also need to be prepared for the worst-case situations, such as sanctions, expropriations, or violence, and have contingency plans in place.

4 Diversify your portfolio

Another way to manage institutional risks is to diversify your agribusiness portfolio across different markets, products, or services. This can help you reduce your exposure and dependence on a single institutional environment, and increase your resilience and competitiveness. By diversifying your portfolio, you can also leverage the comparative advantages and opportunities of different institutional contexts, such as lower costs, higher demand, or better quality. However, diversification also requires careful research, planning, and management, as it may entail additional costs, risks, or challenges.

5 Comply with standards

Finally, one of the most important ways to manage institutional risks is to comply with the relevant standards and requirements of your institutional environment. These may include legal, regulatory, ethical, environmental, social, or quality standards that apply to your agribusiness activities and outputs. By complying with these standards, you can avoid penalties, fines, or lawsuits, as well as enhance your reputation, credibility, and customer satisfaction. You can also use these standards as a competitive advantage, by demonstrating your commitment to excellence, responsibility, and sustainability.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?