Developing an Analytical Model for Risk Mitigation and Growth in Manufacturing SMEs

Nothando Tshuma, Jason Mwanza, Emmanuel Sibanda and Tsepeso Setoboli
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Nothando Tshuma: University of Zambia
Jason Mwanza: University of Zambia
Emmanuel Sibanda: University of Zambia
Tsepeso Setoboli: National University of Science and Technology

International Journal of Research and Scientific Innovation, 2024, vol. 11, issue 11, 596-608

Abstract: The primary objective of this study was to develop an Analytical Model for Risk Mitigation and Growth in Manufacturing SMEs. Based on the study’s conceptual framework, data were collected via a questionnaire. The analysis was conducted using the random utility theory. The study finds cash flows, market penetration, investment, and diversification collectively explain the durable mitigation strategies implemented by manufacturing SMEs to enhance business growth. However, the probit model revealed that diversification was statistically insignificant at the 5% level of significance, suggesting that diversification is less important for bolstering the growth of manufacturing SMEs for manufacturing sector in Bulawayo. The study concludes that SMEs implementing durable mitigation strategies, which combine both informal and formal risk management practices, are more likely to experience business growth compared to those that follow either a formal risk management guideline or strictly an informal risk management practice. SMEs should prioritize improving cash flow management and making strategic investments to enhance growth. Given the statistical insignificance of diversification, SMEs should carefully assess the potential benefits and risks before pursuing diversification. Efforts should be made to increase market penetration through targeted marketing and expanding customer bases. Combining both informal and formal risk management practices can foster growth. SMEs should continuously monitor their risk mitigation strategies and adapt them based on changing market conditions and business environments.

Date: 2024
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