Risk management focuses on adopting a systematic and consistent approach to manage all of the risks confronting organization. Risks distinctiveness applicable to SMEs in Kenya include: uncertain risk, a chance of loss, normally accidental, sudden and unforeseen. This uniqueness makes entrepreneurs to seriously think about risk, its impact on their businesses and how risk can be managed. It is therefore important to investigate the influence of risk management practices on performance of small micro enterprises. Five specific research objectives guided the study i.e. to identified the Components of risk in small and medium enterprises (SMEs, to examine the various kind of risk connected with SMEs, to identified risk management methods and techniques used to determine and monitor risks within SMEs, to determine the effect of risk management practices on SMEs performance and to identify impediment associated with risk management of SMEs in Eldoret. The descriptive research was employed in the study. The target population comprises of SME operators mainly drawn manufacturing, services and processing within Eldoret CBD. The sample for the study was selected using stratified random and simple random sampling methods. The research instruments were questionnaire, observation and interview. The data was analyzed using descriptive statistics (frequency tables), while correlation and regression analysis were used to test the hypotheses. The finding of the showed that very few SME owners, managers, entrepreneurs or key designated employees make use of risk management tools and techniques within their businesses, to achieve growth and sustainability. However, the majority agreed to the high importance of risk management in the success of a business enterprise. The findings of the study furthered revealed that leverage on financial structure, issue of collateral security, incapacity to go for technological advancement; tough competition and inadequate margin are among the risk associated with SMEs. The findings of the study furthered suggest that the risk management practice has a lot of effect on SMES performance. This study is significant since it is hoped the findings and recommendations of the study will assist the policy makers in the Ministry of Trade and Industry in making appropriate decisions.
Table of Contents
1. INTRODUCTION
2. STATEMENT OF THE PROBLEM
3. PURPOSE OF THE STUDY
4. KIND OF RISK CONNECTED WITH SMES
5. CONCLUSION
6. RECOMMENDATIONS
Research Objectives and Focus
The primary objective of this study is to investigate the relationship between risk management practices and the overall business performance of Small Micro Enterprises (SMEs) located in Eldoret town, Kenya.
- Identification of specific risk components prevalent in SME environments.
- Examination of various risk categories associated with small-scale business operations.
- Assessment of current risk management methods and techniques utilized by SME owners.
- Analysis of the correlation between structured risk management practices and business performance metrics.
Excerpt from the Publication
INTRODUCTION
Risk is omnipresent and all pervasive in any walk of life. It is more so in the business sectors, particularly in Small and Medium Enterprises (SMEs) (Gould, 2008). The etymology of the word “Risk” may be traced to the Latin word Rescum, which means Risk at Sea. In business, risk is always measured against capital and therefore the Capital to Risk-weighted Assets Ratio (CRAR) is much in vogue (Bowden et al., 2001). Risk is the potentiality that both expected and unexpected events may have an adverse impact on the capital and earnings. When we use the term “Risk”, we all mean financial risk or uncertainty of financial loss (Crouhy et al., 2006). . If we consider risk in terms of occurrence frequency, we measure risk on a scale, with certainty of occurrence at one and certainty of non-occurrence at the other end. When the probability of occurrence or non-occurrence is equal, risk is the greatest.
Risk management is defined as the ‘process of understanding and managing risks that the entity is inevitably subject to in attempting to achieve its corporate objectives’ (CIMA Official Terminology, 2005). For an organization, risks are potential events that could influence the achievement of the organization’s objectives. Risk management is about understanding the nature of such events and, where they represent threats, making positive plans to mitigate them.
Summary of Chapters
INTRODUCTION: This chapter defines the core concepts of risk and risk management, emphasizing the sensitivity of SMEs to business threats and the necessity for owner-managers to adopt structured risk mitigation strategies.
STATEMENT OF THE PROBLEM: This section highlights that many SMEs suffer from a lack of formal risk management approaches, which negatively impacts their sustainability and growth potential.
PURPOSE OF THE STUDY: This chapter defines the research goal of examining the influence of risk management practices on the performance of SMEs in Eldoret.
KIND OF RISK CONNECTED WITH SMES: This section categorizes common risks faced by SMEs, such as financial structure leverage, competition, and collateral issues, and analyzes respondent perceptions regarding these threats.
CONCLUSION: The chapter summarizes that while risk management is acknowledged as vital for success, it is currently underutilized in SME business operations.
RECOMMENDATIONS: This final chapter suggests that governmental and financial institutions should provide sponsored training and that authorities should consider making risk management frameworks mandatory for businesses.
Keywords
Risk, Management, Performance, Small Micro Enterprises, SME, Eldoret, Financial Risk, Risk Assessment, Business Sustainability, Entrepreneurship, Risk Mitigation, Economic Growth, Risk Avoidance, Business Strategy
Frequently Asked Questions
What is the core focus of this research study?
The study investigates how the adoption of systematic risk management practices influences the overall business performance and growth of Small Micro Enterprises in Eldoret town.
What are the primary themes discussed in the paper?
The themes include the definition and classification of business risks, the identification of current management techniques, the assessment of business performance, and the primary obstacles to effective risk management.
What is the overarching research goal?
The goal is to determine if there is a significant relationship between how SMEs handle risk and their success in terms of asset accumulation, earnings growth, and return on investment.
Which scientific methodology was employed?
The study utilized a descriptive survey design, collecting data through questionnaires, interviews, and observations from a sample of SME operators, followed by correlation and regression analysis.
What topics are covered in the main section of the book?
The main sections cover the identification of risk components, an analysis of risks specific to SMEs, an evaluation of current risk management methods (such as avoidance and transfer), and an analysis of performance impediments.
Which keywords best describe this research?
Key terms include Risk Management, Small Micro Enterprises (SMEs), Performance, Eldoret, Financial structure, and Risk identification.
What specific role does the Kenyan government play in the author's recommendations?
The author recommends that the government follows the model of countries like Australia or the UK by implementing mandatory risk management regulations for all types of companies.
Why are most SMEs currently struggling with risk management?
The study identifies a lack of education, limited access to financial support, high costs of specialized training, and a reliance on reactive, rather than proactive, risk avoidance strategies.
- Quote paper
- Judith Jebichii Tuwei (Author), Latoya Cheptoo Berege (Author), 2018, Influence of Risk Management Practices on the Performance of Small Micro Enterprises in Eldoret Town, Kenya, Munich, GRIN Verlag, https://www.grin.com/document/439157
