A proposed operational risk management framework for small and medium enterprises

Abstract

Background: The gap between small and medium-sized enterprises (SMEs) and large businesses that perform risk assessment is significant. SMEs continuously face many operational risks and uncertainties in their daily operations, and these risks threaten to reduce productivity, increase costs and reduce profits.

Aim: The purpose of this article was to develop an operational risk management framework that SMEs can use to identify and analyse risks in their operations and take corrective actions to mitigate these risks.

Setting: Small and medium-sized enterprises in South Africa do not view risk management as a key component of organisational success, despite evidence that businesses that adopt risk management strategies are more likely to survive and grow.

Methods: The article is exploratory in nature, and a conceptual analysis approach was used to formulate the framework. This study reviewed relevant literature sources on risk published between 2002 and 2017.

Results: The four process steps of risk management were used as a reference point and form the foundation for the operational risk management framework. The categories of operational; marketing; technical and financial risks were identified from a review of available literature on risk management.

Conclusion: There is a dearth of research that deals with operational risk management frameworks for SMEs. The expected contribution of this article, therefore, is twofold: firstly, it is envisaged that managers or owners of SMEs could use the proposed framework as a tool to appraise and minimise their operational risks; secondly, it will add to the current body of knowledge on risk appraisal for SMEs.