Sophisticating Property Risk Management: The Next Step For An Industry Whose Dna Codes For Continuous Improvement
A relentless pursuit of continuous improvement – a hallmark of the US Swine industry – has yielded significant advances in productivity, environmental stewardship, animal wellbeing and consumer demand. This pursuit is part of the DNA of those who manage and work in the more than 60,000 pork farms across the country. One of the effects of this increased sophistication and control across the entire value chain is the more significant exposure to risks inherent to a complex, capital-intensive enterprise. As swine producers increase their technology adoption to drive productivity, they must also consider new ways to increase the sophistication of managing those risks.
Today, a typical structure of pork production includes a network of dispersed sow farms, nurseries and contract finishing sites. These sites represent millions of dollars in capital investments, a constant flow of increasingly valuable livestock assets, ever-present concerns over biosecurity and a dependence on an ever-tightening labor supply. A typical 2,400 finishing site might represent $850,000 of invested capital, while a newly constructed sow farm today could easily require 10 times that amount or more.
For a simple illustration, consider the industry’s move from a 1,200 to a 4,800-space finishing barn. In doing so, we’ve improved efficiency and productivity, but also increased the risk exposure for integrators, growers, lenders, and insurers 4x for that single site. Consider, too, the increasing sophistication of control systems (ventilation, power, feed, environmental) required to manage and monitor these facilities. Increasingly fewer and fewer insurers are willing to expose themselves to that much risk – or are doing so at a higher cost to the producer.
At Distynct, we’re deploying better smart alarm systems which significantly elevate our customers’ ability to monitor and manage remote facilities, proactively mitigate losses, and more efficiently deploy labor. These capabilities far exceed incumbent alarms, which are increasingly falling short of the expectations and assumptions of today’s sophisticated operators. These progressive operators are beginning to realize a new pool of value that, when properly identified, captured and documented, can be shared with their risk underwriters (i.e. lenders, insurers) in the form of premium reduction or other competitive advantages.
Risk management is broader than livestock or commodity hedging and extends to preventing losses to property and livestock. With whom do you need to visit to get credit for sophisticating this aspect of your risk management system? How will you prove you are a lower risk and merit lower costs? In this, we believe our customers have a Distynct advantage.
