This article provides an empirical evidence of risk and risk management in SMEs in Palestine and the effect of RM on its performance using several method for assessing risk, RM and performance for (N=330) SMEs participant in Ramallah. Most of SMEs in Palestine do not have a written and formal risk management plan. They mostly concern about Financial and Strategic risks, while Hazard and operational are the least concerned respectively. Performance in SMEs considered medium according to Performance Comparison Approach. SMEs with highest degree of written risk management plan have better performance.
There is a positive correlation between the prospective of the owner/ manager of risk analysis and SMEs’ performance. Strategic and hazard risk analysis is positively associated with performance. The high level of risk mitigation the more SMEs tend to have better performance.
Table of Contents
PERCEPTION OF RISK. RISK MANAGEMENT IN SMES AND EFFECT ON PERFORMANCE: EVIDENCE FROM PALESTINE
Literature Review
Risk Management Process (RMP)
Types of Risks
Performance Measure in SMEs
Risk Management and Performance
Methodology
Measuring Risk and RMP
Performance measure
Reliability test results
RESULTS AND DISCUSSION
Performance of SMEs
Applying formal/written risk management plan in SMEs in Palestine
Is there a relationship between implementing formal/ written risk management process and performance at SMEs in Palestine?
Other results
Discussion and Conclusion
Research Objectives and Key Topics
This paper aims to investigate the perception and involvement of decision-makers regarding risk and risk management within SMEs in Palestine, while assessing the influence of risk management perception and risk exposure on organizational performance using quantitative and qualitative empirical methods.
- Empirical evaluation of risk management awareness among SME owners and managers.
- Classification of risk types (Hazard, Financial, Operational, Strategic) in a Palestinian context.
- Assessment of the correlation between formal risk management processes and firm performance.
- Identification of barriers that hinder the adoption of systematic risk management in small businesses.
Excerpt from the Book
Risk Management Process (RMP)
Much available literature described basic risk management process (RMP). Falkner & Hiebl, (2015); Leopoulos et al., (2006) ; Verbano & Venturini, (2013) agreed on the same steps for Risk management process which are ( Risk identification, analyisis, mitigation, implentation and risk follow up and control). However a zero step considered as the preparatory step by Leopoulos et al., (2006) which is “Risk management objectives and plan”, requires defining the RM plan to be consistent with strategic business objectives and conducting context analysis. In this stage, resources, and process of RM plan are considered.
1. Risk Identification: this is the first step of RMP, which involves determinations of risks that might the project during its whole life cycle and documentation of their nature and characteristics (Champan & Ward 1997 as cited in Leopoulos et al., 2006). This step include several techniques such and methods such as systematic reviews of all data on business assets, activates and staff, financial statements which identify the sources of potential financial losses, using flowchart to analyze all operations or activities of the enterprises (Hollman & Zadeh, 1984 as cited in Falkner & Hiebl, 2015). Leopoulos et al., (2006) mentioned other techniques, for instance, brainstorming, structure interviews, expert opinion and other sophisticated techniques such knowledge management, which identify risk including the development knowledge bases that store “Risk history” of the company.
Summary of Chapters
Literature Review: Provides an overview of defining risk as uncertainty and explores the set of tools and actions known as Risk Management (RM) within the context of SMEs.
Risk Management Process (RMP): Describes the sequential steps of risk management, starting from identification and analysis to mitigation and final control.
Types of Risks: Categorizes risks into four main dimensions: Hazard, Financial, Operational, and Strategic risks.
Performance Measure in SMEs: Discusses the unique characteristics of SMEs and explores various approaches to measure and manage performance effectively.
Risk Management and Performance: Analyzes the empirical link between the implementation of risk management practices and improvements in SME organizational performance.
Methodology: Details the empirical approach using a sample of 330 SME participants in Ramallah and the application of various questionnaires.
Measuring Risk and RMP: Explains the scales and testing methods used to quantify risk management levels and risk matrix dimensions.
Performance measure: Details the use of a five-point Likert scale to assess key performance indicators such as profitability, cash flow, and market share.
Reliability test results: Presents the Cronbach reliability coefficients confirming the stability of the research instruments.
RESULTS AND DISCUSSION: Synthesizes the findings regarding risk prevalence and the statistical correlation between RM implementation and SME performance.
Performance of SMEs: Breaks down the results of performance measurement indicators and their respective impact levels.
Applying formal/written risk management plan in SMEs in Palestine: Examines the current state of formal risk documentation among the studied SMEs.
Is there a relationship between implementing formal/ written risk management process and performance at SMEs in Palestine?: Tests the null hypothesis regarding the impact of RM implementation on firm performance using ANOVA.
Other results: Reports additional findings concerning demographic and experiential variables and their influence on RM practices.
Discussion and Conclusion: Summarizes the study's conclusions, confirming that formal risk management significantly improves SME performance in Palestine.
Keywords
Risk, Risk Management Process, RMP, Small and Medium Enterprises, SMEs, Performance, Palestine, Financial Risk, Strategic Risk, Hazard Risk, Operational Risk, Risk Mitigation, Risk Identification, Empirical Research, Business Performance.
Frequently Asked Questions
What is the primary focus of this research?
The research focuses on the perception, involvement, and effectiveness of risk management practices within Small and Medium Enterprises (SMEs) located in Ramallah, Palestine.
What are the central thematic fields?
The study centers on four key risk dimensions (Hazard, Financial, Operational, and Strategic) and their impact on various performance measures such as profitability, growth, and employee satisfaction.
What is the primary research goal?
The primary goal is to investigate whether the implementation of formal, written risk management processes correlates with enhanced business performance in the Palestinian SME sector.
Which scientific methods were employed?
The study utilizes an empirical approach, collecting data from 330 SME owners/managers via quantitative and qualitative questionnaires. It employs statistical tools like One-way ANOVA, T-tests, and linear regression analysis.
What is discussed in the main body of the paper?
The main body covers the literature review on risk, the theoretical risk management process (RMP), empirical findings on the state of RM in Palestine, and statistical tests verifying the impact of RM on SME performance.
Which keywords characterize the work?
Key terms include Risk Management Process (RMP), SMEs, Performance, Risk Matrix, and Risk Mitigation, reflecting the core variables analyzed in the study.
How do Palestinian SMEs generally perceive different types of risks?
The study found that Palestinian SMEs are most concerned about Financial and Strategic risks, while Hazard and Operational risks were identified as being of lower concern.
What is the conclusion regarding the relationship between risk management and performance?
The study concludes that there is a positive, significant correlation between the implementation of a formal, written risk management plan and better organizational performance in Palestinian SMEs.
- Citation du texte
- Qays Sbaih (Auteur), 2017, Perception of Risk Management in Small and Medium Enterprises (SMEs), Munich, GRIN Verlag, https://www.grin.com/document/461098
