Risk Analysis Example: The Decision Tree

Weed control decision tree

The following is an example of using a decision tree in a typical on-farm decision making process. The example chosen is for rainfall and weed control for a hypothetical location in south-eastern NSW.

Question: When in the next week would be a good time to apply weed control?

Step 1) Circumstances

A particular weed control is said to be 90% effective if no rain occurs within 12 hours of application and less than 1 mm of rain falls in the following three days, whereas it is only approximately 25% effective if rain falls within 12 hours. It is only 50% effective if 10 mm or more falls in the following three days. It has been a reasonably wet season and some rainfall has occurred during each of the past four weeks, and so weed control is needed reasonably soon.

Step 2) Assess forecast information available from Water and the Land - Forecast rainfall pages

Step 3) Discussion

The chances of 10mm rain over the next 3-4 days are very low (close to zero), but there is rain in the area (particularly to the east) and the Water and the Land rainfall forecast maps and Bureau forecasts indicate 1mm is possible for the  next 3-4 days.

Step 4) Assessment

Options Apply weed control today – Day 1, take risk of no rain in a 12 hour period. Apply weed control on Day 3-4. Delay applying weed control for at least 5 days
Cost of chemicals, fuel and labour.
75% of costs lost if rain falls in the 12 hours
Risks quite low, costs of delay might be low also

Contract labour delays

Extra weed growth to control

Other farm operations requiring attention

Other considerations Risk of runoff of contaminated water if rain occurs   Looking for value for money.
Assessment Assessment may be made by combining Costs information and the Other considerations in some way, e.g. using judgement

Step 5) Decision

The final decision is made by comparing the objective assessment of each option.


Additional Reading

Weather Derivatives

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