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How can you manage risks in vertical farming business models?

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Vertical farming is a form of urban agriculture that uses controlled environments to grow crops indoors, such as in warehouses, containers, or skyscrapers. By using artificial lighting, hydroponics, aeroponics, or aquaponics, vertical farms can produce fresh and nutritious food all year round, without relying on soil, weather, or pesticides. However, vertical farming also involves significant risks, such as high capital and operational costs, technological failures, market uncertainties, and environmental impacts. In this article, you will learn how to manage some of the most common risks in vertical farming business models and increase your chances of success.

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Mehmood Yousaf

Operations Manager at Valley Irrigation Pakistan (Pvt.Ltd) || Managing the maintenance and repair of Irrigation System…
Oleksandr Alba

Co-Founder @ COMPLANT CONSULTING | MSc Organic Agriculture/Agroecology
Josiana Zanotelli

Dra. em Agronomia e Desenvolvimento Sustentável/Inclus?o e Sustentabilidade Ambiental e Social/Agro…

1 Risk assessment

Before you start or scale up your vertical farming venture, you need to conduct a thorough risk assessment to identify and prioritize the potential threats and opportunities that may affect your business. A risk assessment can help you to evaluate the feasibility, profitability, and sustainability of your vertical farming model, as well as to plan for mitigation and adaptation strategies. You can use various tools and methods to perform a risk assessment, such as SWOT analysis, PESTEL analysis, scenario planning, or Monte Carlo simulation.

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Mehmood Yousaf

Operations Manager at Valley Irrigation Pakistan (Pvt.Ltd) || Managing the maintenance and repair of Irrigation System || Collaborating with other departments to develop & implement strategies
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Implement robust climate control systems and contingency plans to address environmental risks, while diversifying crop selections and establishing strong supplier relationships to mitigate market and supply chain risks in vertical farming business models.

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Josiana Zanotelli

Dra. em Agronomia e Desenvolvimento Sustentável/Inclus?o e Sustentabilidade Ambiental e Social/Agro indígena/Consultoria Ambiental/Palestrante/Professora/Crédito de Carbono Social/Ivoty
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Gerenciar riscos em modelos de negócios de agricultura vertical é crucial para garantir o sucesso e a sustentabilidade dessa abordagem inovadora. A agricultura vertical envolve o cultivo de alimentos em ambientes controlados, como estufas ou instala??es internas, usando métodos como hidroponia, aquaponia ou aeroponia. Estabele?a um sistema de monitoramento contínuo para avaliar o desempenho da fazenda vertical. Aprenda com os desafios enfrentados e fa?a ajustes constantes no modelo de negócios. Ao abordar essas considera??es, os empreendedores e gestores podem melhorar a resiliência de seus modelos de negócios de agricultura vertical e mitigar os riscos associados a essa forma inovadora de produ??o agrícola.

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2 Risk mitigation

Once you have identified the main risks in your vertical farming business model, you need to implement measures to reduce or eliminate their negative impacts. Risk mitigation can involve different actions, such as choosing the most suitable crops, locations, and technologies for your vertical farm, securing adequate funding and insurance, optimizing your energy and water use, establishing reliable supply chains and distribution channels, complying with relevant regulations and standards, and enhancing your quality control and food safety practices.

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Oleksandr Alba

Co-Founder @ COMPLANT CONSULTING | MSc Organic Agriculture/Agroecology
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GreenLeaf Technologies in Singapore tackled vertical farming risks through technological redundancies, market diversification, and resource optimization. They installed backup systems for critical technologies and conducted regular maintenance, reducing downtime by 90%. Expanding sales to online platforms, supermarkets, and export markets stabilized revenue against local market fluctuations, boosting sales by 40%. Implementing energy-efficient LED lighting and a closed-loop water system decreased energy consumption by 30% and improved water use efficiency, significantly cutting operational costs. This multifaceted approach enhanced both operational efficiency and market resilience, showcasing effective risk management in vertical farming.

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3 Risk adaptation

Besides mitigating the risks in your vertical farming business model, you also need to be prepared to adapt to changing conditions and unforeseen events. Risk adaptation can help you to cope with the uncertainties and variability that may affect your vertical farm, such as market fluctuations, consumer preferences, climate change, or natural disasters. You can increase your adaptive capacity by diversifying your product portfolio, expanding your customer base, developing your human and social capital, adopting innovative and resilient technologies, and participating in collaborative networks and platforms.

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4 Risk monitoring

Another important aspect of managing risks in your vertical farming business model is to monitor and evaluate your performance and outcomes regularly. Risk monitoring can help you to track and measure the effectiveness of your risk management strategies, as well as to identify and respond to new or emerging risks. You can use various indicators and tools to monitor your risk level, such as key performance indicators (KPIs), dashboards, feedback loops, or audits.

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5 Risk communication

Finally, you need to communicate your risks and risk management practices to your stakeholders, such as investors, customers, suppliers, regulators, or the public. Risk communication can help you to build trust and credibility, attract and retain support, enhance your reputation and brand image, and increase your transparency and accountability. You can use various channels and formats to communicate your risks, such as reports, newsletters, websites, social media, or events.

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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?

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Oleksandr Alba

Co-Founder @ COMPLANT CONSULTING | MSc Organic Agriculture/Agroecology
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In Europe capital injection, robust data collection, frequent cleaning, efficient distribution and cheaper packaging are pathways to profitability and have a safer risk profile. In Japan, diversification of revenue streams like tours or education reduce financial risk associated with yield and sales.

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DVS de S gamage

Livestock Specialist - JICA Project 2020 at Free Lance
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Incorporate egg-laying chickens with vertical farming cages between two rows of vertically cultivated crops. The chickens will raise CO2 levels, which can enhance plant growth as plants thrive in high CO2 environments.

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How can you manage risks in vertical farming business models?

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1 Risk assessment

2 Risk mitigation

3 Risk adaptation

4 Risk monitoring

5 Risk communication

6 Here’s what else to consider

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