Reflections on Data-Driven Risk Valuation Models for MSMEs Based on Field Research

Abstract

There are many approaches to risk management, and the practice shows that they are not suitable for IT-centric Micro Small and Medium Enterprises (MSME), but more targeted to large and complex organizations. At the same time, the existing approaches in isolation are aimed at a particular type of risk, not taking into account that MSMEs need a more integrated approach, constraint on time and resources and availability of data. Based on the field research of over 150 organizations, the initially proposed risk management framework was revised generally in the area of scope of the risk, duration, risk management team and risk valuation model. Various risk models were reviewed for appropriateness. The development of IT and its use in organizations allows for preference to data-driven models, but the limitation of MSMEs with resources, and understanding of complex data-driven model limits their use. The field research showed that MSMEs prefer a hybrid method for assessment of risks, as they couldn’t sustain a fully quantitative approach and as managers feel more confident with qualitative estimates.