The risk management practices in the manufacturing SMEs in Cape Town
-
DOIhttp://dx.doi.org/10.21511/ppm.15(2-2).2017.08
-
Article InfoVolume 15 2017, Issue #2 (cont. 2), pp. 386-403
- Cited by
- 3390 Views
-
536 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
Risk management is one of the prominent issues which are pivotal to the success of a business and may adversely affect profitability if not properly practised. Therefore, the main objective of this paper was to determine risk management practices in manufacturing SMEs in Cape Town. The research conducted was quantitative in nature and constituted the collection of data from 74 SME leaders, all of whom had to adhere to a list of strict delineation criteria. All data collected were thoroughly analyzed through means of descriptive statistics. From the findings made, it is clear that SMEs in the manufacturing sector do in fact understand risk management initiatives applicable to ‘manage’ their respective businesses towards sustainability, but not to a large extent. It was found that respondents are unaware of the elements which make risk management effective, which ultimately aids to the development of problems for SMEs. All employees, managers and owners must coordinate their efforts together to identify and manage organizational risks within their ambit to obtain total risk coverage, as well as provide assurance that these risks are effectively managed from a coordinated approach. Further studies may be carried out to identify measures that can be taken to improve the effectiveness of risk management practices in SMEs.
- Keywords
-
JEL Classification (Paper profile tab)L25
-
References70
-
Tables5
-
Figures0
-
- Table 1. The categorization of manufacturing SME sizes
- Table 2. Unemployment statistics of South Africa
- Table 3. Biographic information of SMEs manufacturing enterprises
- Table 4. Perceptions on risk management
- Table 5. Risk management practices of SMEs in the manufacturing sector
-
- Abor, J., & Quartey, P. (2010). Issues in SME Development in Ghana and South Africa. International Research Journal of Finance and Economics, 39(1), 218-228.
- Ahmmed, K., & Bown, R. (2016). Exploring the Role of Private Commercial Banks in Increasing Small and Medium Size Enterprises’ Financial Accessibility in Developing Countries: A Study in Bangladesh. World Academy of Science, Engineering and Technology International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 10(6), 2105-2116.
- Apulu, I., Lathen, A., & Moreton, R. (2011). Factors affecting the effective utilization and adoption of sophisticated ICT solutions: Case studies of SMEs in Lagos, Nigeria. Journal of Systems and Information Technology, 13(2), 125-143.
- Aruwa, S.A.S. (2005). The Business Entrepreneur: A Guide to Entrepreneurial Development. Kaduna: Scopy Publishing.
- Barry, J. (2004). Supply chain risk in an uncertain global supply chain environment. International Journal of Physical Distribution and Logistics Management, 34(9), 695-697.
- Beasly, M., Chen, A., Nune, K., & Wright, L. (2006). Working hand in hand; Balance Scorecard and Enterprise Risk Management. Strategic Finance, 87(9), 180-206.
- Betchoo, N. K. (2015). The need for accounting training Packages for small scale firms in rural Mauritius. Advances in Social Sciences Research Journal, 2(7), 15-26.
- Bolton, P. (2006). Government Procurement as a Policy Tool in South Africa. Journal of Public Procurement, 6(3), 193-217.
- Bryman, A., Bell, E., Hirschsohn, P., dos Santos, A., Du Toit, J., Masenge, A., Van Aardt, I., & Wagner, C. (2014). Research Methodology: Business and Management Contexts. Cape Town: Oxford University Press.
- Butcher, C. (1999). DTI – positioning South Africa for global competitiveness. Institute of Marketing Management. Professional Marketing Review, 1-15.
- Cant, M. C., & Wiid, J. A. (2013). Establishing the Challenges Affecting South African SMEs. International Business & Economics Research Journal, 12(6), 707-716.
- Ching, H. Y., & Colombo, T. M. (2014). Enterprise Risk Management Good Practices and Proposal of Conceptual Framework. Journal of Management Research, 6(3), 69-85.
- Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2004). Enterprise Risk Management – Integrated Framework Executive Summary.
- Davies, T. A. (2001). Enhancing competitiveness in the manufacturing sector: key opportunities provided by inter firm clustering. Competitiveness Review, 11(2), 4-12.
- Davis, C. (2014). The aims of research. A chapter in Research Matters. In du Plooy – Cilliers, F., Davis, C., & Bezuidenhout, R. (Eds.), 1-17, 74-81. Lansdowne, Cape Town: Juta.
- De Bakker, K., Boonstra, A., & Wortmann, H. (2010). Does risk management contribute to IT project success? A meta-analysis of empirical evidence. International Journal of Project Management, 28, 493-503.
- Ekwere, N. (2016). Framework of effective risk management in Small and Medium Enterprises (SMES): A literature review. Journal. Unpar. Ac.id, 20(1), 23-46.
- El-Namaki, M. S. S. (1990). Small business: the myths and the reality. Long Range Planning, 23(4), 78-87.
- Everett, J., & Watson, J. (1998). Small Business Failure and External Risk Factors. Small Business Economics, 11(4), 371-390.
- Faisal, M. N., Banwet, D. K., & Shankar, R. (2007). Information risks management in supply chains: an assessment and mitigation framework. Journal of Enterprise Information Management, 20(6), 677-699.
- Fatoki, O. (2012). An Investigation into the Financial Management Practices of New Micro-enterprises in South Africa. Journal of Social Science, 33(2), 179-188.
- Fatoki, O., & Smit, A. (2011). Constraints to credit access by new SMEs in South Africa: A supply-side analysis. African Journal of Business Management, 5(4), 1413-1425.
- Finch, P. (2004). Supply chain risk management. Supply Chain Management: An International Journal, 9(2), 183-196.
- Gupta, P. K. (2011). Risk management in Indian companies: EWRM concerns and issues. The Journal of Risk Finance, 12(2), 121-139.
- Harland, C., Brenchley, R., & Walker, H. (2003). Risk in supply networks. Journal of Purchasing and Supply Management, 9(1), 51-62.
- Hillson, D. (2009). Managing Risk in Projects. England: Burlington.
- Hsu, C., Lien, Y., & Chen, H. (2013). International ambidexterity and firm performance in small emerging economies. Journal of World Business, 48(1), 58-67.
- Jackson, S. L. (2009). Research Methods and Statistics: A critical thinking Approach. USA: Wadsworth.
- Joubert, C., Schoeman, N., & Blignaut, J. (1999). Small, Medium and Micro Sized Enterprises (SMMEs) and the Housing Construction Industry: A Possible Solution to South Africa’s Socio Economic Problems. SAJEMS NS, 2(1), 21-33.
- Jowah, L. (2011). Research methodology: Research is a process and hence follows a logical sequence from start to finish. Cape Town: Jowah Book publishers.
- Kongolo, M. (2010). Job creation versus job shedding and the role of SMEs in economic development. African Journal of Business Management, 4(11), 2288-2295.
- Koonin, M. (2014). Validity and Reliability. A chapter in Research Matters. In du Plooy- Cilliers, F., Davis, C., & Bezuidenhout, R. (Eds.), 252-259. Lansdowne, Cape Town: Juta.
- Kraus, S., Rigtering J.P.C., Hughes, M., & Hosman, V. (2012). Entrepreneurial orientation and the business performance of SMEs: a quantitative study from the Netherlands. Rev Manag Sci, 6, 161-182.
- Lavastre, O., Gunasekaran, A., & Spalanzani, A. (2012). Supply chain risk management in French companies. Decision Support Systems, 52, 828-838.
- Malhotra, R., & Temponi, C. (2010). Critical decisions for ERP integration: Small business issues. International Journal of Information Management, 30(1), 28-37.
- Manu, C. (2005). Risk management in the context of public sector reforms.
- Mbonyane, B., & Ladzani, W. (2011). Factors that hinder the growth of small businesses in South African townships. Eur. Bus. Rev, 23(6), 550-560.
- Minsky, S. (2012). How to measure your Enterprise Risk Management effectiveness.
- Napp, A. K. (2011). Financial risk management in SME – The use of financial analysis for identifying, analyzing and monitoring internal financial risks. Master thesis. Aarhus School of Business, Aarhus University.
- National Credit Requlator (NCR). (2011). Literature Review on Small and Medium Enterprises’ Access to Credit and Support in South Africa.
- Ngary, C., Smit, Y., Bruwer, J-P., & Ukpere, W. I. (2014). Financial Performance Measures and Business Objectives Attainment in Fast Food SMMEs in the Cape Metropolis: A preliminary Liability and Suitability analysis. Mediterranean Journal of Social Sciences, 5(20), 909-921.
- Ngubane, N., Mayekiso, S., Sikota, S., Fitshane, S., Matsoso, M., & Bruwer, J. P. (2015). Inventory Management Systems used by Manufacturing Small Medium and Micro Enterprises in Cape Town. Mediterranean Journal of Social Sciences, 6(1), 2039-9340.
- Noorvee, L. (2006). Evaluation of the Effectiveness of Internal Controls over Financial Reporting. Master’s Thesis, University of Tartu, Tartu.
- Ntsika Enterprise Promotion Agency. (2001). State of Small Business Development in South Africa. Annual Review.
- Oak Ridge Associated Universities. (2005). What are performance measures?
- Olawale, F., & Garwe, D. (2010). Obstacles to the Growth of New SMEs in South Africa: A Principal Component Analysis Approach. African Journal of Business Management, 4(5), 729-738.
- Pietersen, J., & Maree, K. (2007). Standardisation of a questionnaire. A chapter in First steps in research by Creswell, J. W., Elbersohn, L., Eloff, I., Ferreira, R., Ivankova, N. V., Jansen, J. D., Nieuwenhuis, J., Pietersen, J., Plano Clark, V.L., & Van der Westhuizen, C. Hatfield, Pretoria: Van Schaik.
- Prinsloo, S., Walker, C., Botha, L., Bruwer, J. P., & Smit, Y. (2015). The Influence of Combined Assurance Initiatives on the Efficiency of Risk Management in Retail Small and Very Small Enterprises in Bellville, South Africa. Expert Journal of Business and Management, 3(2), 63-81.
- Rao, S., & Goldsby, T. J. (2009). Supply chain risks: a review and typology. The International Journal of Logistics Management, 20(1), 97-123.
- Rogerson, C. M. (2013). Improving market access opportunities for urban small, medium and micro-enterprises in South Africa. Urbani izziv, 24(2), 133-143.
- Scarborough, N. M., & Zimmerer, T. W. (1996). Effective Small Business Management. 5th ed. Upper Saddle River, NJ: Prentice Hall.
- Schultz, A. G. (2001). Risk assurance model for the small medium and micro enterprise sector. A dissertation submitted in partial fulfillment of the requirements for the degree of Master Technologiae in the Faculty of Management at the Cape Technikon.
- SEDA. (2010). Small Enterprise Development Agency Monitoring.
- Senik, Z., Scott-Ladd, C., Entrekin, L., & Adham, K. A. (2011). Networking and Internationalization for SMEs in emerging economies. J.Int Entreprenuership, 9, 259-281.
- Singh, R., Garg, S., & Deshmukh, S. (2010). The competitiveness of SMEs in a globalized economy: Observations from China and India. Management Research Review, 33(1), 54-65.
- Smit, Y. (2012). A structured approach to risk management for South African SMEs. A dissertation submitted in fulfillment of the requirements for the degree of Doctor Technology in the Faculty of Business at the Cape Peninsula University of Technology.
- Smit, Y., & Watkins, J. (2012). A literature review of small and medium (SME) risk management practices in South Africa enterprises. African Journal of Business Management, 6(21), 6324-6330.
- South Africa. (1996). National Small Business Enabling Act No, 102 of 1996. Pretoria: Government Printer.
- Statistics South Africa. (2011). Mid-year population estimates.
- Tang, C. S. (2006). Perspectives in supply chain risk management. International Journal of Production Economics, 103, 451-488.
- Tang, O. U., & Musa, S. N. (2011). Identifying risk issues and research advancements in supply chain risk management. Int. J. Production Economics, 133, 25-34.
- Tehseen, S., & Ramayah, T. (2015). Entrepreneurial Competencies and SMEs Business Success: The Contingent Role of External Integration. Mediterranean Journal of Social Sciences, 6(1), 50-61.
- Terungwa, A. (2012). Risk Management and Insurance of Small and Medium Scale Enterprises (SMEs) in Nigeria. International Journal of Finance and Accounting, 1(1), 8-17.
- Terziovski, M. (2010). Innovation practice and its performance implications in small and medium enterprises (SMEs) in the manufacturing sector: a resource-based view. Strategic Management Journal, 31(8), 892-902.
- Tumaini, M. K., & Zheng, Q. (2011). Supply Chain Management (SCM) and Small and Medium- Sized Enterprises (SMEs): Is it a Myth? Applied Mechanics and Materials, 58-60, 2613-2620.
- Urban, B., & Naidoo, R. (2012). Business sustainability: empirical evidence on operational skills in SMEs in South Africa. Journal of Small Business and Enterprise Development, 146-163.
- Van Eeden, S., Viviers, S., & Venter, D. (2003). A comparative Study of selected problems encountered by small businesses in the Nelson Mandela, Cape Town and Egoli metropoles. Journal of South African institute for management statistics, 12(3), 13-23.
- Watkins, J. A. (2012). Theses/ Dissertations / Research Reports: a Practical guide for students to the preparation of written presentations of academic research. Cape Town: Content Solutions.
- Watt, J. (2007). Strategic risk management for small businesses. In Reuvid, J. (Ed.). Managing Business Risk – a practical guide to protecting your business. 2nd Ed. London – Philadelphia: Kogan Page.
- Yanta, T. (2001). Local government supporting or stunting SMME growth? University of Natal, Centre for Applied and Social Sciences. Indicator South Africa: A Barometer of Social Trend, 18(2), 44-48.