Assessing the 10 categories in the cannabis value chain by risk, a study by Kaiser EDP and Ignited Unlimited found primary production and cultivation to carry a “very high risk”, while genetics, extraction and processing, retail were all deemed “high risk”. “Medium risk” sectors in the cannabis value chain were identified as inputs, export and import, labs, analysis and testing, brand-building and marketing and support services. Only the research and product development sector was categorized as “medium to low” risk, the lowest of all categories.

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The authors provided explanations of the nature of the risks and potential steps to mitigate against this.

Very High Risk

Primary Production/Cultivation

Nature of Risk

Investment and finance risk technology risk Climate and water risks Electricity supply issues Genetics risks Biohazard risks (mould, contamination) Regulatory risk Market, pricing, timing and competition risk

Potential Mitigations

Education, training and agronomic research needed to equip farmers. Existing support structures like farmers associations should be utilised. Alternative markets for rejected products should be developed. Resilience through redundancy build into water and electricity supply Remediation technology for contaminated products. Insurance.

High Risk

Genetics

Nature of Risk

Time required to develop and stabilise new genetics, shifting consumer patterns, legislation changes and competition.

Potential Mitigations

Focus on African genetics and the incorporation thereof into hemp and Cannabis breeding programs will explore a niche that can become mainstream.

Extraction and processing

Nature of Risk

Regulatory risks Market, pricing and competition risks Investment risk. Technology risk. Supply chain and timing/sequencing risks (all stages of processing / supply chain links secured, “chicken and egg” situation, contracting risk) .

Potential Mitigations

Minimise investment into new and unproven technology. Optimise investment into local development of processing technologies. A commodity body needed to coordinate planting, harvesting, processing and marketing of hemp.

Retail

Nature of Risk

Market and consumer risk (information, knowledge/awareness) competition. Regulatory risk.

Potential Mitigations

Due diligence and market research. Market awareness. Cooperation between establishments. Awareness of regulatory changes and interpretation by law enforcement agencies.

Medium Risk

Inputs

Nature of Risk

Technology risk, market and competition risk. Oversaturation

Potential Mitigations

Suppliers must stay on top of technological advances and remain competitive in pricing. Focus should be on customer service.

Import and Export

Nature of Risk

Market, pricing and competition risks, Currency fluctuations .Regulatory risks. Supply chain risks. Compliance related rejection of products

Potential Mitigations

Legal counsel, and staying informed of regulatory issues. Regular testing of produce throughout the season to ensure compliance.

Labs, analysis, testing

Nature of Risk

Technology risk. Regulatory risk. Certification or licencing failure

Potential Mitigations

Thorough equipment research. Legal council. Following good laboratory practice. Efficient laboratory management software.

Brand-building and Marketing

Nature of Risk

Market, pricing and competition risks. Supply chain risks. Regulatory risks. Social Media bans

Potential Mitigations

Due diligence. Legal council. Adherence to labelling and packaging regulations. Utilise a range of marketing platforms and methods

Support Services

Nature of Risk

Market risk.

Potential Mitigations

Ability to adapt. Focus on customer service Innovation and efficiency.

Medium to Low Risk

Research and Product Formulation

Nature of Risk

Long term investment required, time frame could lead to parallel development of similar technologies. Stability testing for products is expensive and time consuming and a product could ultimately fail.

Potential Mitigations

Government or institutional grants. Enabling investment into the sector.

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