Risk Factors and Risk Management Strategies as Correlates of Profitability and Survival of Selected Small and Medium Enterprises (SMEs) in Nigeria

Abstract

The study identified risks faced by SMEs. It assessed the use of four risk management strategies (diversification, collaboration, credit scorecard and insurance) by SMEs to manage their risks. The data used for the study was collected through interviews and questionnaire. Data collected was analysed through factor analysis, chi-square and MANOVA analysis. The study established that risk management is a major challenge faced by SMEs in Nigeria. The results show that credit scorecard was the most commonly used strategy by SMEs to manage their risks, followed by diversification and collaboration. Insurance was the least strategy used by SMEs to manage their risks. It also revealed that there is significance difference between risk management strategies adopted by SMEs to manage their risks. The implication for practice is that SMEs favour some risk management strategies over others; hence, SMEs should identify most suitable and effective risk management strategies to manage their risk exposures. Keyword: Risk, risk factor, risk management strategies, SMEs, Nigeria