Effects of Enterprise Risk Management Practices on Performance of Small and Medium Scale Enterprises. A case of Dar es Salaam City, Tanzania.
DOI:
https://doi.org/10.26437.ajar.03.2022.13Abstract
Purpose: This study highlights the effect of enterprise risk management (ERM) practices on Small and Medium Scale Enterprises' (SMEs') performance in Tanzania.
Design/ Methodology/ approach: Research was conducted in Tanzania's capital city of Dar es Salaam. A total of 335 participants were surveyed using structured questionnaires. The gathered data were analyzed with descriptive statistics, and the proposed study hypotheses were tested with the Structural Equation (SEM) in the R statistical programming language using the lavaan package. Tables and diagrams were used to present the model and its outcomes.
Findings: The results indicated that the relationship between internal environments (IE), Monitoring (MT), Event Identification (EI), Risk Response (RR), and Risk Assessment (RA) all significantly influenced ERM at a 95% confidence level. The findings indicated that an enterprise's effort in detecting and managing risk has a substantial effect on the performance of SMEs.
Research Limitations: During the process of conducting this research, there were some obstacles. SME entities were hesitant to complete the questionnaire, despite the researchers' direct approach. Also, many SMEs were less suited to directly entering their responses into questionnaire sheets, and some preferred to respond in their native languages.
Practical Implication: The practical implications of this study are to decrease the possibility and amount of loss and enhance SME performance, such as return on capital and lower expenses, through better integration of risk assessment and management, which will make SMEs more competitive and sustainable.
Originality/value: The study provides new insights into the role of ERM in increasing the performance of small and medium-sized enterprises (SMEs) in Tanzania and contributes to the field of SMEs research.
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