Cannabis Risk: What Should Be on Your 2025 Radar?
“Even a mother - Jewish or not - can't worry about everything. So it is important that we limit our worries to real as opposed to imaginary risks.” Richard Thaler
My clients and regular readers know I pay a lot of attention to risk. This is not because I am an accountant or a risk manager. But rather I have learned that in cannabis you often make money by not frittering it away because you operate with bad strategic and financial assumptions.
The successful cannabis companies I know are judicious decision makers who pay attention to risk management.
Unfortunately, in the broader industry too many leaders have a risk blind spot. They will miss or ignore ‘macro forces’ outside of cannabis that can significantly impact their costs, supply chains and customer behaviour. To be fair, it is not that operators want to ignore macro considerations; rather, they often have their hands full dealing with internal issues.
Daniel S. Loeb can help. He is the founder of Third Point Management, and is considered one of the savviest global investors around.
Loeb recently published his top 10 macro-economic risks for 2025. I picked 3 of his most salient risks and outline how they could impact cannabis firms.
1. US raises tariffs (90% probability)
Tariffs raise the cost of production inputs and packaging, further squeezing margins and potentially increasing prices for consumers. Trump’s tariff threats could also spark a broader global trade war leading to higher overall costs and financial market instability.
2. Inflation rebounds (50% probability)
New tariffs along with ongoing wage increases (we are in a tight labour market) and seasonal factors could reignite inflation. This could blunt interest rate decreases (so much for reducing your cost of capital) and lead to a reduction/change in consumer weed purchases. Fact is, many consumers consider weed to be a ‘nice to have’ not a ‘need to have’.
3. Geo-political issues (50% probability)
Simmering problems in Ukraine and the Middle East could deteriorate even further, potentially compromising supply chains and distracting governments. Additional geo-political problems could emerge in Iran (energy cut offs drive up prices), Germany (new recession, political instability) and China (supply chain interruptions, banking upheavals).
In unpredictable and precarious times, conducting a proper risk assessment is de rigueur in strategic and financial planning.
Call me. I help leadership teams and Boards plan with confidence, minimize risks and prudently capitalize on market opportunities.
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