Financial Risk Management in Dutch SMEs: An Empirical Analysis

Abstract

Financial Risk Management plays an important role in safeguarding the continuity of enterprises. This paper analyzes current financial risk management (FRM) practices applied by Dutch Small and Medium-sized Enterprises (SMEs). In particular, the methods used by SMEs to manage credit risks, exchange rate risks, liquidity risks and interest rate risks. Data of 97 Dutch SMEs, gathered in the period 2013-2017, show SMEs focus on risk process rather than setting up an organizational structure to embed the process. However, the attention firms pay on process is positively correlated to organizational structure. Where SMEs, within the risk management process, appear to have a correlated equal focus on risk identification, measurement and evaluation, mitigating risks seems to be treated more separately. Finally, the analysis of possible determinants shows that the level of financial risk management in Dutch SMEs is determined by two variables: the level of education of the risk manager and the degree of decentralization.