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Dairy Business Sustainability, Market Risk Management Resilience and Stability Strategies

DOI: 10.4236/jmf.2025.154030, PP. 727-756

Keywords: Dairy Market Volatility Risk, Stochastic Efficient with Respect to Function (SERF), Certain Equivalent (CE), Market Risk Premium Analysis, Monte Carlo Simulation, Absolute Risk Aversion Coefficients (ARAC), Profit Sustainability, Ecosystem Resilience and Stability, Risk Tolerance

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Abstract:

The dairy business and industry in Oman grapples with complex challenges, from wavering milk prices and escalating input costs to ever-shifting market dynamics; all factors that can significantly impact business profitability and stability. The supply chain disruption due to COVID-19 pandemic and regional market system resistance was also investigated. Dairy business must, therefore, implement potent strategies to enhance cash flow and safeguard financial viability and move to market system resilience. This article delves into key methods designed to analyze dairy business risk assessment and market dynamic channelings and efficiency to boost profits in dairy operations and improve cash flow management. The study applied Stochastic Monte Carlo Simulation Budget and scenarios approach to calculate market risk primum and reform market strategies and align them with acceptable risk tolerance comfort level of the stakeholders’ perceptions. Three production levels, products mix models, were tested under two different scenarios to verify coronavirus impact and to measure market risk and corporate system resilience. The net profit probability distribution skewed to the left for all models in the study and 5% net profit probability distribution of Country sale shift from RO (318k) loss in year 2020 to RO 230k profit in 2023. The analysis shown that Country sale has resilience ecosystem recovery although coronavirus crisis results in a complete lockdown continued for 10 months in 2020 and could achieved stability in year 2023. The cumulated distribution function (CDF) graph was constructed to quantify market risk and indicate the range and shape of profit probabilities distribution for six different production volumes and marketing alternatives. The stochastic efficiency with respect to a function (SERF) analysis used to calculate certain equivalent (CE) figures to rank alternative market’s scenarios under uncertain situations. The analysis showed dairy business net profits in 2023 are sustainable alternatives than COVID-19 year in 2020, and Factory Area are better and stable market region than Capital Area. Tornado sensitivity analysis showed that products unit cost, followed by reginal market demand and market incentives, are highly sensitive to profit in integrated complex system. Quadrant analysis was performed to understand dairy products market shares and market growth potential and accordingly management could develop comprehensive market strategies to achieve business objectives. The risk premium value for total Country sales in 2020 and 2023

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