The Use of Financial Products in Liquidity Risk Management by SMEs

Abstract

Abstract Risk, which is inherent to any business activity, is an issue that should be considered as early as at its conceptual stage and the very idea of its creation. The awareness of its existence and effective risk management is one of the factors which decide whether an organization will prosper or not. Control over possible risks can be exercised in several ways, one of which is outsourcing of risk to other market participants, such as financial institutions. This option is not a widespread solution in the Polish market, which may be due to low awareness among managers in the field of both risk identification and diversification. In the era of entrepreneurial economy, SMEs, which account for 99.8% of the European population and generate about 50% of GDP, having a significant impact on international trade, should become the primary addressees of training and education initiatives to inform them about risks and possibilities of their mitigation. The purpose of the article is to indicate financial services, mainly factoring, offered by money market institutions as an opportunity to improve current financial liquidity of enterprises, and to demonstrate the importance of education in adequate understanding and promotion of those solutions.