Farmers make decisions every day that affect farming operations. Many of the factors that affect the decisions they make cannot be predicted with complete accuracy; this is risk. Farming has become increasingly risky as farmers become more commercial. Farmers need to understand the implications of governance, risk and compliance by using risk management skills to better anticipate problems and reduce consequences.

Risks affects production such as changes in the weather and the incidence of pests and diseases. Equipment breakdown can be a risk as can market price fluctuations. Borrowing money can also be risky with sudden changes in interest rates. Risk can also occurs as a result of changes in government policies. Such risks often have a major impact on farm income. Finally, there are risks related to the health and wellbeing of the farmer and his family and the supply of labour for the farm.

Farmers have to find ways of dealing with the risk and protecting themselves from the uncertainties of the future. Good risk management decisions depend on accurate information which requires reliable data. Good information can help a farmer make rational governance and risk management decisions. The sources of information available include internal farm records or external data such as statistics, market price data and other farmers.