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.