A study of palm oil fruit dealers’ business risks

This study will investigate the fruit dealer’s business risks exposure and profile within the context of Malaysian palm oil environment. The uniqueness of this study lies in its attempt to explore new knowledge regarding business risks faced by the agriculture intermediaries.
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A study of palm oil fruit dealers’ business risks 622Int. J Sup. Chain. Mgt Vol. 8, No. 1, February 2019 A Study of Palm Oil Fruit Dealers’ Business Risks Ahmad Raflis Che Omar#1, Suraiya Ishak*2 # Faculty of Economics and Management, National University of Malaysia, 43600 Bangi, Selangor, Malaysia * Faculty of Social Science and Humanities, National University of Malaysia, 43600 Bangi, Selangor, Malaysia 1raflis@ukm.edu.my 2suraiya@ukm.edu.myAbstract — This study examines the palm oil fruit and wealth accumulation. Entrepreneurs aredealers (FDs) risks within their business venture. We individual who able to recognize opportunitiesemployed interview method to gather fresh data from meanwhile others merely see chaos and confusions.five (5) informants in Selangor. The finding revealed Thus, entrepreneurs possess differentthat the fruit dealers possess some element of characteristics and behaviours from managers andentrepreneurial risks comprises of willingness to small business owners [8],[9].accept calculated risks, ability to foreseeopportunities, visionary and self-determination. The In this context, FDs can be regarded as anFDs have encountered business risks arises from the entrepreneurs based on their risk taking propensity.normal fresh fruit bunches (FFB) purchase and Therefore, this study will investigate the fruitselling activities. FDs are also exposing to default risk dealer’s business risks exposure and profile withindue to the credit facilities or trust based-loans the context of Malaysian palm oil environment.provided to the local palm oil smallholders. Overall, The uniqueness of this study lies in its attempt tothe fruit dealers seem to perform a defensive andreactive response towards the exposed risks rather explore new knowledge regarding business risksthan relatively employing pro-active strategies to faced by the agriculture intermediaries.mitigate the occurrence of the risks.Keywords - Palm oil, fruit dealers, risks, business risk, 2. Literature Reviewagriculture. The salient characteristic of entrepreneurs is the risk taking attitudes. Entrepreneurs carry risks and1. Introduction uncertainties in their business process [4], [6], [11], [17]. According to [15], business risks arise due toThe intermediary entity within the production chain uncertainty about the future effects of currentof Malaysian palm oil smallholders/operators decisions. Every business choice would consist ofreferred to the fruit dealers (FDs). FDs play the role assessment of outcomes and possibilities that theas the bulk purchaser for the local smallholders actual outcomes differ from the expectations [16].fresh fruit bunch (FFB) [5], [12]. The purchase of The business risks have increased due to currentFFB in Malaysia are conducted through a few turbulence in the economic system [6]. Hence, allmodels - (1) smallholders may send their FFB to business entities are assumed to expose to variousfruit dealers for immediate cash payment or risks in market place.deferred payment; or (2) the fruit dealers According to [7], there are a few strategies for“purchase” the FFB sale document from business risk management. The strategies comprisesmallholders and pay them with cash. The fruit of (1) minimizing risk exposure thoroughdealer will wait for the payment date stated in the diversification of products/services; (2) transferringdocument and get cash from the mills. As far as the risks to outsiders such as contracting andfruit dealers are concerned, the palm oil outsourcing risky activities; and (3) developingintermediaries may expose to various diversified operation capacity to manage or bearing theand undiversified business risks. potential risks such as maintaining liquidity of According to [9], entrepreneurship or business assets and other relevant techniques.venture operation refers to the process of value The palm oil intermediaries are recognize as acreation, which incorporates various activities such group of entrepreneurs who are willing to acceptas creating organizations, change, innovation and a and manage relevant risks to operate the fresh fruitunique combination mode of various critical bunch trading activities [13]. Thus, this studyresources. It aims to capitalize new opportunities examines the FDs’ business in order to comprehendand to obtain compensation in the form of profit the understanding pertaining to entrepreneurial______________________________________________________________ characteristics embedded in the FDs ven ...