Question: Impact of risk and uncertainty on business growth and sustainability in Nigeria.
Business Risks Facing Small and Medium Enterprises (SMEs) and large firms operate in the same business environment but there are evidences that they derive different benefits and opportunities therein. More so, they are exposed to diverse categories of risks. This is because of their differences in economic capacity including asses to human capital and material resources. Kelkar (2008) posits that SMEs are weak in terms of business plan, management structure and in decision making when compared to large organizations. This further increases SMEs’ inability to absorb most business ...view middle of the document...
Risk cannot be managed unless it is first identified. Therefore, the next step of the process is risk identification. Its aim is to identify possible risks that may affect the objective of the business negatively or positively. Risk analysis is the fourth step of the process. It enables risks to be classified according to their importance. It also assists in the determination of both the possible impact of risks and likelihood of occurrence. Henschel (2009) recommends that SMEs should avoid rigorous risk analysis techniques.
Instead, they should draw on checklist, questionnaires, workshop, feedback diagrams and risk brainstorming. After risk analysis is risk evaluation, this implies a comparison between the levels of risk found during risk analysis to the acceptance level of risks earlier determined in the process.
Evaluation is followed by risk treatment. This concerns considering alternative risk treatment strategies and selection of the best option to treat each risk, particularly those not considered tolerable. The various risk treatment devices open to SMEs are risk avoidance, loss prevention, loss reduction, risk sharing, risk retention, risk transfer and risk diversification. The last step of the risk management process is to monitor and review. Like the first step, this also cut across the entire process. Risk changes over time, hence, the need for periodical monitoring and review to ensure that changing circumstances do not alter the risk priorities.
Business growth and sustainability under risk in Nigeria
The aim of an average entrepreneur (SMEs, owners in particular) extends beyond profit-making. Business growth and expansion constitute key objectives of SMEs. However, in a study conducted by Idemobi (2012), it was revealed that over 70% of SMEs die within five years of establishment. This means that less than 30% of SMEs can survive various business challenges.
The concept of sustainability as used here is defined as the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families, the local and global community as well as future generations (Crals and Vereeck, 2004).
Sustainability is often considered as a possibility for large enterprises than SMEs because of variations in size and ability to overcome challenges in the business environment. In view of this, an entrepreneur must recognize and extend fair treatment to the three P’s of People, Planet and Profit (Crals and Vereek, 2004).
The authors further argue that all the aspects have to be satisfied before SMEs can be labeled as sustainable.
Firstly, the aspect of “People” looks at how SMEs handle social and ethical issues. The kind of treatment they extend to their employees, whether it encourages social cohesion or not. Key issues like the protection of human rights, non-indulgence in fraud and corruption, the use of child labour, gender relationship and discrimination on the...