The Effect of Risk Management Practices on Performance of Small and Medium Scale Enterprises

Abstract

The main objective of the research is to examine the effect of risk management practices on performance of Small and Medium Scale Enterprises (SMEs). The convenience sampling method was used for the study. The study used a sample size of 285 small and medium scale enterprise businesses for the analysis.  The study used primary data obtained through questionnaire administration which was analysed using SPSS 25 and Microsoft Excel 2019. The study used both descriptive and inference analysis to analyse the data. According to the findings, low educational level of respondents helped to conclude that risk management is not widely practiced in SME businesses. Risk management practices are not well practiced in SME business because the SME owners possess low level of knowledge in the areas of identifying, assessing, treating and monitoring key operational risks. The positive relationship between risk management practices and performance is indicative that the proper practice of risk management by SME managers or owners influences performance. The significant relationship between the dependent variable (performance) and independent (risk management practices) provided the conclusion that, the more SME businesses improve on their risk management, the more they improve upon their performance. The study recommends an improvement in risk management knowledge for SME business owners and managers. The government should take adequate steps to provide risk management support for SMEs sectors. The study recommends SME businesses to put in place systems that enable the documentation of the business operations.