Teaching students to turn risk into opportunities

Greg and Mamie CaseProviding opportunities for K-State students and helping them develop into tomorrow’s leaders are goals of Greg and Mamie Case, Winnetka, Illinois. They’ve donated more than $1 million to K-State’s Center for Risk Management Education and Research (CRMER) to create the Greg and Mamie Case Integrated Risk Management Endowment.

The center engages students, both undergraduate and graduate, and industry partners in innovative education and research, advancing their risk management skills and knowledge. The center is a joint effort of faculty and students from K-State’s Colleges of Agriculture, Business Administration, Engineering, and Arts and Sciences. Additional partners from across campus also participate.

“By supporting the Center for Risk Management Education and Research, we can create opportunities for interested students to learn that risk is opportunity, that businesses can achieve their desire for predictability by understanding risk and how it will impact their organizations,” said Greg Case, K-State alumnus and president and CEO of Aon, a global risk management and HR solutions firm. “Gaining this perspective through the center will allow those students to understand that the challenges associated with managing risk are enormous, but the organizations that confront risk head on will stand to make tremendous gains for their stakeholders.

The funds from this endowed gift will be used for student fellowships, student educational experiences, program development, faculty support and other needs determined by the center’s director.

“I hope this gift can, in some small way, elevate the discussion around risk management,” Case said. “With the growing presence of non-traditional risks such as cyber risk, pandemic risk and social media risk, it is important that we have a strong national dialogue, not only in board rooms but on college campuses, on what we need to do to address these challenges because of the impact they and other such risks can have on our global economy.”


Written by Marisa Larson, KSU Foundation

Click here to make a gift online via the Kansas State University Foundation. For more information about ways to support the Center, contact Emilie Fink at emilief@found.ksu.edu or 785.532.7571.

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Applications for the Food Security Challenge

“It always seems impossible until it’s done”- Nelson Mandela

Last week student fellows, Shelby Hill and Mario Ortez, along with two other graduate students in the Agricultural Economics Department, Michelle Estes and Emily Mollohan, had the opportunity to go to Cape Town, South Africa and participate in the 2014 International Food and Agribusiness Management Association (IFAMA) World Forum, Symposium and Case Study Competition. IFAMA works towards improving the strategic focus, transparency, sustainability and responsiveness of the global food and agribusiness system.

The conference gathered highly diverse attendants within the global food and agribusiness industry, including academic and industry professionals. The theme of this year’s forum was “people feed the world” with a special focus on Africa’s food and agribusiness sector.

We also had the opportunity to visit South Africa’s Food Bank in Cape Town where we had a small round table discussion with the company and a tour of the food bank distribution center and warehouse. The food bank’s mission is to facilitate distribution in order to link hungry people in need with food. In 2013 they were able to provide 40,000 meals a day. These meals come from rescuing damaged goods and soon-to-expire goods. The food bank was established in 2009 and isn’t well known in South Africa. Their main goal is to build a self-sustaining model that provides a service instead of charity.

 

The two of us have provided our own reflections and insights from the trip.

 Mario:

Africa was once considered and described as the land of despair but is now quoted as a hopeful continent. The conference combined with other experiences during the trip has definitely shaped my perception about the “mother” continent. From my economic point of view, this now hopeful place will play a bigger role in the agribusiness industry in the years to come. Jacques Tylor, MD of John Deere Financial for Sub-Saharan Africa said, “Africa needs to see the agriculture sector as a business not as a way to fight poverty.” I think those words are very applicable for other developing parts of the world. Throughout the conference there was a consensus among the speakers about the need to add a new aspect to the food security issue related to food quality. The challenge is not just to provide enough affordable food to feed everybody, but to provide food that is high quality and nutritious.

The question is: who provides the food? The extreme charitable model would say rich people in the world should provide for the poor. I think a more sustainable hybrid approach is to enhance individual development. Helping farmers in developing worlds by teaching them how to better grow their crops is a huge step in the direction of feeding the world.

As for mitigating risk, some of the top priorities identified for the agriculture sector in Africa include uncertainty, volatility and policy requirement. All of these need a deep understanding of the type of industry we are in now. Based on that understanding, development of the appropriate risk management tools is necessary to achieve risk optimization in a rapidly changing environment.

It was very interesting how the whole conference focused on the development of young leaders in agriculture. Young leaders are needed to overcome the challenges the agriculture industry faces today. Although this sounds like a big problem to tackle, it’s good to be reminded of Nelson Mandela’s famous quotes, “It always seems impossible, until it’s done.” In a study performed across the agriculture sector in Africa, “positive work attitude” was identified as the number one interpersonal skill that employers are looking for followed by ethics. Additionally, agriculture and finance were the most preferred areas of expertise.

 

Shelby:

Our trip to Africa was an amazing opportunity and learning experience. The combination of the conference, the sightseeing, the food, and the people made the trip so meaningful. From the moment we arrived in Cape Town we started exploring and preparing for our case study competition. The first round of the competition was on Sunday, June 15th. We were given a case study and had a total of four hours to read over it, develop a strategic plan, and put our recommendations and action-plan into a presentation. We then presented our analysis to a panel of three judges coming from both academic and industry backgrounds. I think all four of us team members can say we learned a lot from the experience. Having the opportunity to present our analysis on an African business to African professionals really made the experience more realistic and significant.

The conference theme was centered on the phrase, “people feed the world.” This couldn’t have been more fitting for the location of the conference. Africa is known as the mother continent but yet is the last frontier when it comes to development and agriculture. There are so many small-holder farmers in Africa; however, these farmers are still using production practices from nearly a century ago. The issue at hand is feeding an ever-increasing global population. Africa will have to be the upcoming food producing continent in order to achieve this goal of feeding the world. One of the topics that conference speakers and attendees spoke on that has stuck with me is how important it is to invest in African agriculture and to help small-holder farmers by teaching them production practices that allow for greater yields. Greater yields for these small-holder farmers have the opportunity to make huge differences. Farmers can be able to feed their families and put an end to hunger seasons, as well as market their remaining crops to maximize their profits. An organization called One Acre Fund has established a business model in order to help these farmers. They provide services that help with the distribution of seed and fertilizer, finance farm inputs, train the farmers on agricultural techniques, and help facilitate markets to maximize profits from harvest sales. It’s amazing that farming is a leading occupation for the world’s poor. It’s hard to fathom that these people are growing food, but yet they’re still going hungry and are unable to provide food to their children. In order to feed the world, I believe it’s so important to invest in these types of farmers. Just like Mandela’s quote, “It always seems impossible until it’s done.” Helping small-holder farmers and investing in agriculture development is a daunting task, but not impossible. If the investment in these farmers helps end hunger and reach food security, I’d say the investment is well worth it.

The trip has left me wanting to do more, see more, and grow more into an agriculturalist ready to tackle some of these issues the agriculture industry is facing. Mario and I appreciate all the support, tools, and skills we have been given through involvement in the Risk Management Center. The opportunity to travel abroad, compete, attend a meaningful conference, and sightsee is one that will have lasting impacts.

We would like to thank the CHS Foundation, K-State College of Agriculture, K-State Dept. of Agricultural Economics and the Center for Risk Management Education and Research for your support in making this trip possible.

 

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Tales from Global Grain North America 2014

I had a blast at the Hyatt Regency in Chicago this past two days, where the 2nd Annual Global Grain North America was held. The objective of the conference, “to provide with a strategic outlook on North America’s physical and financially traded grain markets” understates the amount of amazing information I was flooded with during these two days.

Topics covered included grain production outlooks from the major producers’ areas in the world: United States, South America, China and Black Sea region. The major issues of concern were touched by world class professionals and experts in their fields/region of the globe and their willingness to share their valuable knowledge was remarkable to me.

From the Black Sea region perspective lots of things are going on with Ukraine for example, which is a country devoted to Agriculture, a big cereal exporter in the world and with logistics access to the Black Sea. The political divisions are causing lack of cash flow and from a risk management perspective trade routes might be of high interest for countries like Russia. Weather is always important for grain production but at this point, political risk seems to be the high priority. Is the rest of the world grain industry worried? Maybe a little more during the Black Sea’s region harvest time, one delegate pointed.

In the United States, where Uncle Sam has managed to keep slow but consistent economic growth after the 2008 economic crisis, the concerns for the grain industry seem to be related to events that we cannot control such as weather. Weather conditions vary in different areas of the country and might affect/benefit crops depending on the area. In the harvest time, the distribution of the stocks might pose logistic concerns. U.S grain exports, just like economic books suggest, rely on the importers countries necessities (demand).

For China some people would agree that the increase in number of the middle class is translated to increase in global grain demand, and personally I would go along with this thought. Today China enjoys more an open a diversified grain industry, where you can find state owned companies, foreign companies and private domestic companies. Apparently, the corporate farming phenomenon is not happening just in the United States, in China small farmers are moving to the cities and sometimes government will help them to, then farms are becoming more concentrated and probably more efficient. It was interesting to listen Chinese delegates concerned about the infrastructure in Brazil, a country where they import a significant quantity of soybeans and other grains from. Does this mean Chinese grain industry is aware that they are not self-sufficient to fulfill their grain necessities? Not sure, but what I am sure is that China is mitigating some risk related to their suppliers’ infrastructure with some investments in countries like Brazil. Canada might have some important lessons to teach ROW, with their government, industry and growers all engaged trying to improve their logistics and infrastructure.

So in Brazil, similar to China the farmers’ new generations might not want to farm anymore and are migrating to the cities which might be causing an increase on the potentially more economically efficient large-scale farms. I would generalize this case for other important grain producers like Argentina. Political risk is present in South America, where some governmental actions include controlled currency policies and unexpected establishment of quotas. So, if the government comes today and restricts the wheat exports, what will happen to the already transacted product through future contracts? Large and financially stable producers hedge against risks like inflation by holding grains. Logistics are a big concern in South America and Brazilian delegates see this as an opportunity, while countries like U.S. work towards saving cents in production costs, Brazil works towards saving dollars, they said.

Regarding the meat industry, Mr. Randy Blach (CEO at Cattlefax) expressed that the historical decrease in the number of cows in the U.S., the largest producer of beef in the world, might be offset by productivity gain per head. The U.S. is also the origin for one third of the world’s pork and poultry. Interesting enough, China, the biggest meat producer in the world does not appear to be exporting their meat, but importing even more. So increases in world demand for meat create challenges and opportunities for the global grain industry. However, this will or is already challenging other areas such as market access, transportation, financial regulations and trade regulations.

Across all these nations, exchanges have played an amazing role in mitigating risks in the commodities sector and as price discovery centers. But wait, is that the only thing that exchanges do? While it is true that futures markets and options are invaluable risk management tools for sellers and buyers, there are other players called speculators. The objective of speculators in the market is to make money, which is fair to me. Additionally they provide something we called liquidity to the market which is simply “enough buyers and sellers”. But speculators are not something new and the hot topic in New York and Chicago are what Michael Lewis calls “Flash Boys”. In fact when on my way back from work this week I stopped at the Chicago Public Library to check out his most recent masterpiece called “Flash Boys: A Wall Street Revolt” I could not find any available, but what I did find was a waiting list of over 150 people for that specific book. Anyways, High Frequency Trading (HFT) refers to the speed in which an individual is able to make transactions. From my very deep ignorance about this issue, I would say then, it is related to how fast can these so called flash boys process/take advantage of information. One question would be, is it unfair if you are faster than I? I do not have the answer for that question, but what the folks at the conference were positive about was that there might be some actions to take to make sure the market is honored all the time.

I would like to give special thanks to David Lehman and Thomas Merriman both at CME Group, for their comments and insights regarding this article.

Chicago Landmark, house of the Chicago Board of Trade

Chicago Landmark, house of the Chicago Board of Trade

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Is risk good or bad?

On April 24th, CRMER students had the opportunity to meet with Mike Bernard and talk about “Enterprise Risk Management” at the K-State campus in Manhattan, Kansas. Mr. Bernard is General Director for Capital Planning and Financing at Union Pacific.

Mr. Bernard’s presentation was a great fit for the purpose of the center. He discussed topics related to “Enterprise Risk Management” which is continuous process that must occur across the whole organization, not just specifically dictated by one individual. During the presentation, Mr. Bernard shared about Union Pacific’s perception and appetite about risk, which they have determined and evolved over time according to their past experiences and opportunities.

Is risk good or bad? Mr. Bernard mentioned that this is a deep question that many companies consider. It turns out that if people avoid all risk, they might be avoiding success. Some other things come into play when asking that question, such as, is the risk we are discussing rewarded or not? Different strategies might be focused on diving into new markets, acquiring partners or focusing on protecting current assets therefore minimizing potential losses.

As CRMER student fellows, we appreciated the opportunity to spend time and learn from Mr. Bernard’s experience within the Risk and Management fields. We very much appreciate his willingness to share with us such important knowledge and experiences. Thanks to Mr. Bernard for taking the time to visit K-State and engage with the Center for Risk Management Education and Research.

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Bob Goodpaster from The Hershey Company speaks to CRMER Student Fellows

On April 15, 2014, student fellows of the Center for Risk Management Education and Research had the opportunity to listen to and discuss with Bob Goodpaster, Vice President, Chief Global Knowledge Officer at The Hershey Company. Mr. Goodpaster shared about his career and how he came to work in market research within the Hershey Company, where he has been for the past eleven years. He shared valuable knowledge about the twists and turns his career has taken and how that allowed him to pursue market research as a career. Mr. Goodpaster then shared a brief overview of the history and values of The Hershey Company.

Mr. Goodpaster’s next topic covered the evolution of market research due to the advancements in data collection and analysis. New career paths have developed due to this evolution. He explored the various industries and fields in which careers related to consumer insights, advanced analytics, and predictive analytics will be available. Mr. Goodpaster shared his hope that big data analytics will someday be able to predict the trends in the market and not only be used for analysis. He also shared the challenges that this data poses to analysts and examples of how this new technology has been able to help The Hershey Company make decisions. Mr. Goodpastor then allowed the student fellows to ask questions about the topics he covered. The students discussed topics with Mr. Goodpaster that included big data analytics, The Hershey Company’s advertising policies, and diversifying their portfolio to embrace the trend toward healthy food options in the United States.

The student fellows that had the opportunity to attend Mr. Goodpaster’s presentation enjoyed learning about new career options and were grateful for the discussion that Mr. Goodpaster facilitated. Kassie Curran, 2014-2015 student fellow, said, “Hearing from Mr. Goodpaster about career opportunities in consumer market research and how a large food company manages and analyzes big data in order to better serve its customers was a learning experience students don’t often get. Making connections with industry experts is one of the biggest benefits of being a fellow of the Center”.

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Agriculture is Not a Lifestyle Anymore?

The Center for Risk Management Education & Research Student Fellows joined the AGEC 680 Risk Management class on April 16, 2014, for a presentation by Elizabeth Hund, the SVP & Division Manager for US Bank Food Industries.  Ms. Hund is a Kansas State University graduate and is now based out of Denver, Colorado. US Bank makes sizeable loans to large agricultural businesses.  She discussed the elements of risk and risk management strategies with the food supply chain.

The presentation began by defining risk.  Ms. Hund emphasized the fact that risk may be avoided by pre-emptive action also mentioning that banks will not loan businesses money unless they have a plan in place to protect themselves.  She discussed how risk is present in all points of the food supply chain.  The main areas of risk she talked about were commodity price risk, financial risk, and counter-party risk.  She helped expose students to real-life issues that businesses face involving risk.  In regards to commodity price risk, she mentioned how she advises her clients to develop a hedging plan.  The financial risk component was interesting.  The aspect of liquidity was one of the important points.  She said if a business does not have the available liquidity when they need it, borrowing the money will add significant cost to the business.  For counter-party risk she discussed worker strikes, unfulfilled contracts, and bank failures during the Great Recession.  Ms. Hund emphasized how important it is for businesses to have a plan in place that states, “What am I going to do if this happens?”

Black swan events such as the Pink Slime and BSE were also mentioned.  No one can predict black swan events, which can destroy a business in one day.  Even though risk usually has negative connotations associated with it, companies can also benefit when risk causes things to move into their favor.   An example of this could be commodity prices rising because of foreign issues.  She emphasized how events such as the purchasing of Smithfield foods by a Chinese company and the turmoil in Ukraine can affect us in the United States.

Hund made a concluding point of how lucky we were to be involved in the agriculture industry because everyone eats every day!  She also quoted, “Agriculture is not a lifestyle anymore; it’s a business.”  This is an important point to remember for college students who will be making careers out of agriculture.  Overall, the student fellows appreciate Elizabeth Hund taking time to visit Kansas State University and offering us her valuable insight.

Elizabeth Hund

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Lee Borck will give a presentation on the pathway to entrepreneurial success

‘Beefing Up Your Future’ to be Presented at K-State April 28       

Looking to bridge the gap between agriculture and consumers, the Kansas State University student organization, Food for Thought, presents the Upson Lecture Series on Monday, April 28, at 7 p.m. This edition of the lecture series will host Kansas State University alumnus and entrepreneur Lee Borck. He will address the K-State and Manhattan communities in Frick Auditorium, located in Mosier Hall of the College of Veterinary Medicine.

Borck will focus his message on challenges facing young people today and how agriculture played a role in his success as an entrepreneur. “Beefing Up Your Future” will be free and open to the public.

A 1970 graduate of K-State, Borck earned a degree in agricultural economics. He has served as president of the Kansas Livestock Association and a member of the board of directors for the K-State Foundation. Along with his heavy involvement with K-State and agriculture, he also is in such business ventures as American State Bank in Great Bend, Kan.

Through his endeavors, Borck has come to understand the importance of hard work, building strong personal relationships and maintaining an entrepreneurial spirit. This lecture will focus on being successful in these three attributes, as well as the importance of agriculture in his career. His message relates to students, faculty and community members, whether they are striving for success in future careers or determining their next business ventures.

The Upson Lecture Series honors Dan Upson, who taught at K-State’s College of Veterinary medicine for 35 years before retiring in 1994.

For more information on Food for Thought visit: www.bloggingfoodforthought.blogspot.com or http://www.facebook.com/fftgroup.

 

Story by: Mary Lou Peter
mlpeter@ksu.edu
K-State Research & Extension News

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