Risk Management Implementation in SMEs Investigated Through a Lens of ERM Maturity Models

Daniël Gerhardus Plessis and Arthur Linke ()
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Daniël Gerhardus Plessis: University of Stellenbosch Business School
Arthur Linke: University of Stellenbosch Business School

A chapter in Risk Management, 2022, pp 115-139 from Springer

Abstract: Abstract Enterprise Risk Management (ERM) has become the best practice for corporates and listed companies to improve organisational performance and oversight in order to gain competitive advantage. Small- and Medium-sized Enterprises (SMEs) contribute significantly to economies, however, they are among the most vulnerable enterprises, with the majority of SMEs failing within just a few years. The lack of formal risk management practices within SMEs is attributed to a perceived high cost of implementation and lack of direct, measurable benefits, the absence of employees skilled and knowledgeable in risk, and differing regulatory stipulations. This study utilises established risk management maturity measurement instruments to test the implementation of ERM critical success factors within SMEs in two key South African agriculture sub-sectors. ERM critical success factors were implemented to varying degrees within these SMEs, whereby significantly higher ERM implementation ratings were reported among firms who either identify as not being family-owned or enterprises who are governed by an independent board of directors. Overall, risk management practices are not as formalised or as established as they could be, with some SMEs exhibiting overconfidence towards their risk management practices, and many not exploiting the benefits that a more structured and strategic approach to risk management could provide.

Keywords: Enterprise risk management (ERM); Risk management maturity; Small- and medium-sized enterprises (SMEs); South Africa; Agriculture sector (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:rischp:978-3-030-88374-4_6

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DOI: 10.1007/978-3-030-88374-4_6

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