The Development of a Small and Medium-Sized Business Risk Management Intervention Tool

Niël Almero Krüger,Natanya Meyer

doi:10.3390/jrfm14070310

Niël Almero Krüger, Natanya Meyer

Open Access

https://doi.org/10.3390/jrfm14070310

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Abstract

Risk is inevitable in business. For large companies, risk management is formalised and structured through compliance with industry standards. However, small and medium-sized businesses (SMEs) rarely have adequate resources to develop their own standards or conform to pre-established criteria. This results in an increased vulnerability to risk, which tends to undermine SMEs’ sustainability. The primary reasons for the low adoption rate of risk management are related to the tremendous initial difficulty in orientating the business concerning risk and the significant investment of the workforce in developing and implementing a structured managerial process. The objective of this paper is to produce a guided process tool for small and medium-sized businesses with which they can identify, evaluate, and appropriately address risks from an SME perspective. Moreover, this intervention would offer enhancements at no cost beyond the time of its implementation. In order to identify what constitutes holistic risk management, document analysis was applied, which utilised risk management standards, academic articles, books, and regulatory policy and strategy documentation. The identified elements were integrated with a tool that improves business owners’ capacity to position themselves in context with their daily risk management challenges.

Highlights

Risk, as per definition, is embodied in reducing a business’s assets values or forfeited business opportunities and originates from the functions performed in and the environment of a business (Aven and Renn 2009; Marx and de Swardt 2013; Šebestová and Sroka 2020).the risk is present when the frequency, exposure, probability, or outcome of risk is unspecified as it relates to a possible risk event (Kaplan and Garrick 1981; Knief 1991; International Organisation for Standardisation (ISO) 2018)
Having identified that risk management has a positive and pervasive effect on all aspects of business management, the particularities that surround small and medium-sized businesses (SMEs), and their characteristic challenges that they must face on a day-to-day basis, two studies were run by the author to confirm the particularities as they relate to South African SMEs
Their application can be problematic for smaller businesses, and this impedes SME sustainability, as it leads to a misappropriation of resources and increased vulnerability to risk events

Summary

Introduction

As per definition, is embodied in reducing a business’s assets values or forfeited business opportunities and originates from the functions performed in and the environment of a business (Aven and Renn 2009; Marx and de Swardt 2013; Šebestová and Sroka 2020).the risk is present when the frequency, exposure, probability, or outcome of risk is unspecified as it relates to a possible risk event (Kaplan and Garrick 1981; Knief 1991; ISO 2018). SMEs do not have the equivalent motivation to comply with risk standards because the size of their operations rarely requires thorough compliance with standards similar to the expectations of larger companies. Many of the risks identified by these standards require immediate intervention by the business; these are often left unmanaged, placing the business in a vulnerable position The smaller the business, the less likely management will be aware of risk management standards or how to implement such protocols (Weissinger 2013) effectively. Krüger (2020) disclosed that SME owners have a conception of risk management; their knowledge is generally limited to crisis management when compared to best practice standards.

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