Journal of Natural Sciences Research www.iiste.org ISSN 2224-3186 (Paper) ISSN 2225-0921 (Online) Vol.10, No.4, 2020 1 Risk Perception and Management in Smallholder Vegetable Farming in Eastern Ethiopia Murad Ali Ahmed 1* Jema Haji 2 Belaineh Legesse 3 Tinsae Demisse 4 1.School of Agricultural Economics and Agribusiness, Haramaya University, Tel: +251915766121, P. O. Box: 138, Haramaya University, Ethiopia 2.School of Agricultural Economics and Agribusiness, Haramaya University, Ethiopia 3.Director of research and Evaluation Division, Frontieri Consulting PLC, Addis Abeba, Ethiopia 4.School of Agricultural Economics, Dilla University, Ethiopia Abstract This study examines vegetable producing farmers’ risk perception and management strategies. Using survey data collected from 385 smallholder vegetable farmers from East Hararghe zone of Oromia region of Ethiopia, descriptive statistics and factor analysis were used for analyzing farmers risk attitude, classifying risk sources and management strategies. The analysis of risk attitude indicated that the majority of vegetable farmers considered themselves to be risk-takers towards important farm decisions which would help in the adoption of risk management strategies. The result of factor analysis identified low profitability, energy inaccessibility, production, price variability, human / social and institutional factors as principal sources of risk. Moreover, factor analysis also identified production management, loss minimizing and diversification as risk management strategies adopted by smallholder vegetable farmers. Policy makers should focus on enhancing the profitability of smallholder vegetable farmers, stabilizing input and output price, managing production risk, expanding energy access and facilitating the provision of necessary farm inputs. Moreover, it is also necessary to make the operation of cooperatives/unions accountable and their input provision fair and efficient. Keywords: Vegetable farming, factor analysis, risk perception, risk management, risk attitude. DOI: 10.7176/JNSR/10-4-01 Publication date: February 29 th 2020 1. Introduction Risk perception relates to the feeling and thoughts of human beings (Sjoberg, 1998). It includes the processing of information related to risk as well as the coping strategies used by people to deal with an uncertain outcome. Risk management is the measure undertaken by farmers anticipating the possibility of unfavorable event happening and taking appropriate action if the adverse event happens to minimize its impact (Kahan, 2008). This study focused on the perception and management of risk of smallholder vegetable farmers in Eastern Ethiopia. Eastern Hararghe zone of Oromia in Eastern Ethiopia is well known for the production of different types of vegetables. The most commonly grown vegetables in terms of the number of growers are Irish potato, cabbage, onion, carrot, and beetroot (East Hararghe Zonal Agricultural Bureau, 2017). Vegetable marketing is also an important means of income generation and employment for farmers in the zone because it is well situated in terms of proximity to neighboring regions and countries. The vegetables produced in Eastern Hararghe are marketed to nearby market centers like Kombolcha, Dire Dawa, Harar, Jigjiga and also exported to neighboring countries such as Djibouti and Somaliland. Even though vegetable production and marketing offer numerous opportunities as was previously stated, investment in the sector entails risk. Several factors which are not within the control of farmers are responsible for the riskiness of vegetable production. The factors are related to biological plant growth, climatic condition, drought and floods (Chavas and Holt, 2002; Goodwin and Mishra, 2000). These factors cause random production shocks and harvest failure of vegetable production. Moreover, the riskiness of vegetable production could also be attributed to policy shocks (Dercon, 2002). The perishability and unpredictability of yield create difficulty in scheduling the supply of vegetables to market demand. Moreover, vegetables are also affected by price and quantity risks coupled with changing consumer demand and production conditions. Unexpected weather condition or major crop diseases can also negatively influence the production and hence the marketing system. Hence, it is important to examine the different types of risk faced by the smallholder vegetable farmers and risk management strategies they employ to mitigate the perceived risks. According to Harding (1998), ‘risk refers to a combination of the probability, or frequency of occurrence of a defined hazard and the magnitude of the consequences of the occurrence.’ In other words, it is concerned with the frequency of happening of the particular potentially harmful event and the consequence of this occurrence. Studies related to risk perception and management has been conducted in both developed and developing countries. The studies related to risk in developed economies focused on a crop, livestock, aquaculture farmers