Abstract
Agricultural producers have a number of options in managing agricultural risks and many of them utilize these risk
management strategies simultaneously. However, most of the previous studies ignore the potential correlation among the risk
management adoption decisions and farmers’ behavior of simultaneous adoption of the risk management tools. Therefore,
the present study is designed to examine farmers’ decisions of adopting risk management tools (diversification,
precautionary savings and credit) and investigate the impacts of various factors on farmers’ risk management decisions. The
study is carried out in four districts of Khyber Pakhtunkhwa province in Pakistan. Multivariate model is used to assess the
impacts of independent variables on farmers’ decisions of adopting Diversification, Precautionary Savings and Credit to
manage farm risk keeping in view the potential for simultaneous adoptions of these risk management tools. The results
suggest that the decisions of adopting risk management tools are correlated and the adoption of one risk management tool
induce farmers to adopt other risk management tool(s) at the same time. Furthermore, the risk management tools adoption
decisions are influenced by variety of factors including farm and farm household characteristics, farmers’ perceptions of
catastrophic risk sources, their attitude towards risk and their access to information and credit sources.
