A systematic risk management approach for small medium sized enterprises (SMEs) in Nigeria manufacturing sector

Abstract

Small and Medium-sized Enterprises play a vital part in most developing countries' economies (Burgstaller and Wagner, 2015). For Small and Medium-sized Enterprises in Nigerian manufacturing sector to be productive and relevant in today's competitive global environment; it must be able to respond to changes (in culture and practices) that influence Risk Management practices. The management of risk techniques and approach in manufacturing production-line of developed country recommend methods through which profit and productivity can be increased via RM practices. Thus, Omoyajowo (2016, p1410) reiterated that there is a continuous need for the manufacturing sector in Nigeria to invest a significant amount of resources to manage risk, which in turn optimises the production output and hence increases the profitability of this sector (if implemented properly). Abubakar (2015) pointed out that the manufacturing industries are one of the essential sectors that modern-day economies are driven by, without any regards to whatever the governing factors might be. To help improve the effective implementation of the existing Risk Management practices in Small and Medium-sized Enterprises in the Nigeria manufacturing sector, the researcher develops a Systematic Risk Management process. This study explores the challenges that contribute to ineffective Risk Management in the Nigeria manufacturing sector, focusing on Small and Medium-sized Enterprises. This study discovered that the Nigeria Factory Act implementation and organisational culture have proved to be the significant challenges encountered in this sector. In tackling the four research questions raised, a mixed-method data collection approach involving a range of stakeholders was adopted. Sixty-four questionnaires were distributed among targeted participates, 18 one-to-one semi-structured interviews conducted among managerial staffs, and six non-managerial staff participated in the Focus Group session. Data collected provided in-depth insights into the issues affecting Risk Management practice in this sector. Data were coded using NVivo, and SPSS was used in analysing the quantitative data collected. Vensim Decision Support System was used to develop the System Dynamic model and simulate five scenarios that could help risk managers with swift policy formations. The outcome of this study is an empirical basis for policy formation and decision-making vis-a-vis SMEs in the Nigeria manufacturing sector. Besides, the researcher proposed a systematic Risk Management framework in achieving an effective Risk Management practice.