An Empirical Study Of The Impact Of Risk Management On The Effectiveness Of Small Scale Enterprises Management In Nigeria A Case Study Of Selected Small-Scale Enterprises

ABSTRACT

This project critically examined an empirical study of the impact of risk management on effectiveness of small scale enterprises management in Nigeria. The research employed survey research design. Data used for the study were obtained from primary and secondary sources, with the use of structured questionnaires which were administered to the designated respondents. Based on the data collected, analyzed and statistically tested, the researcher discovered among other that poor risk management will be of adverse effect in small scale enterprises in Nigeria, the researcher concluded that risk management improves corporate governance in a small scale firm. The researcher recommended that the management of any firm should make it a point of duty to increase awareness of the importance of practicing risk management in their establishments.

CHAPTER ONE

• INTRODUCTION

  • BACKGROUND OF THE STUDY

Insurance is a unique industry and one of the contributing factors to its uniqueness is the product of the insurers, that is the promise to indemnify at a future data, is tangible. It has been generally accepted that the insurance industry exist to guarantee the continued the existence of other industries.

As an illustration if a factory that is insured is destroyed insurer will indemnify the insured by repairing the factory thereby guaranteeing the continued existence of the factory Ojukwu (2006).

Risk management is a central part of any organization’s strategic management. It is the process whereby organization methodically addresses the risks attaching to their activities with the goal of achieving sustained benefit within each activity and cross the portfolios of all activities. Risk management in any organization involves the identification, analysis and economic control of these  risk which threatens the assets or earning capacity of organization. For the insurance companies there should be a system which allows for the identification, analysis, and control of risk. One of the most crucial features of risk management in the insurance organization is the proficiency in communication; insurance organization could be extremely effective in risk analysis, risk financing or loss control but if the organization is unable to communicate their findings and to members of the insuring community, their efforts would not have been achieved the besived objective. The risk management in insurance organization implies working within economic budgets, managing staff, planning, making decisions in fact everything which is normally associated with management. The essence of risk management is to ensure that the risk exposure is reduced to a minimal or rather tolerable level. Irukwu (1991) defined risk management as the management procedure devised in order to minimize the adverse effects of possible financial loss by identifying potential sources of loss, measuring the financial consequences of a loss occurring and, using controls to minimize actual losses of their financial consequences.

Bello (1999) defined the risk management as the protection of assets, earnings liabilities and people of an enterprise with maximum efficiency and at minimum cost. www.businessdictionary.com defined risk management as policies, procedures and practices involved in identification, analysis, assessment, control and avoidance, minimization, or elimination of unacceptable risks. www.riskinstititute.org defined risk management as the process of dealing with uncertainty and trying to achieve the best outcome possible for the organization.

According to www.anz.com, risk management involves a set of steps which begins with a sound understanding of one’s business and the exposures or risks that have to be covered to protect the value of that business. Then an assessment should be made of the types of variables that can affect the business and how best to protect against unwelcome outcomes. Consideration must also be given to the preferred risk profiles whether one is risk averse or fairly aggressive in approach. This also involves deciding which instruments to use to manage risk and whether a natural hedge exists that can be used. Once undertaken, a risk management strategy should be continually assessed for the effectiveness and cost.

The focus of good risk management is the identification and treatment of these risks. Sanusi (2009) defined risk as the probability that an organization or an individual will be unable to meet some expectation it had set for itself in a given period. Egungwu (2004) defined risk as a situation where it is not known what the future outcome will be but where the various possible outcomes may be expected with some degree of confidence from knowledge of past or existing events. Risk is the combination of the probability of an event and its consequences. In simple terms, risk can be seen as a combination of the chance that something may happen and the degree of damage or loss that may result if it does occur.

Its objective is, to add maximum sustainable value to all the activities of the organization; it marshals the understanding of the potential upside and downside of all those factors which can affect the organization. It increases the probability of success and reduces both the probability of failure and the uncertainty of achieving the organizations overall objectives.

Risk management should be a continuous and developing process which runs throughout the organizations strategy and the implementation of that strategy. It should address methodologically all the risks surrounding the organizations’ activities past, present and in particular future. It must be integrated into the culture of the organization with an effective policy and a programme led by the most senior management. It must translate the strategy into tactical and operational objectives assigning responsibility throughout the organization with each manager and employee responsible for the management of risk as part of their job description. It supports accountability performance measurement and rewards, thus promoting operational efficiency at all levels.

Risk management is an increasingly important business driver and stakeholders have become much more concerned about risk. Risk may be a drive of strategic decisions, it may be a cause of uncertainty in the organization or it may simply be embedded in the activities of the organization. An enterprise wide approach to risk management enables an organization (in this context a small scale firm) to consider the potential impact of all types of risks on all processes, activities, stakeholders, products and services. Implementing a comprehensive approach will result in an organization benefiting from what is often referred to as the “upside of risk”.

It is the interest of this study to conduct an empirical study of the impact of risk management on the effectiveness of small scale enterprises management in Nigeria.

• BACKGROUND OF ORGANIZATION

BRIEF HISTORY OF RENNY’S FAST FOOD 

Renny’s fast food started as a restaurant in the late 90s. It is owned and managed by Mrs. Ngozi Obiaga as a hospitality industry, being a service provider; it is aimed at providing quality service to its targeted customers. It offers an indoor or outdoor, catering services like: weddings, birthdays, and chieftaincy e.g. coronation e.t.c. its’ cooperate headquarters branch is situated at No. 45 Ekwema Crescent Ikenegbu Owerri, Imo state. Presently, Renny’s Fast Food has a staff capacity of about 65 and has some branches within and outside the state like Port Harcourt and Bayelsa state.

• STATEMENT OF THE PROBLEM

Presently, small scale business enterprises in Nigeria are faced with problems that hamper the growth and development of these enterprises. This support the saying that the success of any business whether small or big or mega depends largely on the performance of people which is management, finance and multiple and high tax.

Risk management is a new practice to our society. It seems awkward to business men in our country. The trend had been to run business as sole proprietorships. Decisions are quickly taken with making profits immediately the ultimate priority. To adopts the practice will not be easy.

According to Eheduru(1995), the statement of the problem serves to elaborate up the information implies in the title of the study.

Small scale business has gotten its fair share of risk tendency that is prevalent in the society in recent times. Theories risk has propounded that risk behavior is derived from a number of causes. Small scale business are faced with a lot of risk which involves management and if not well take care of will cause a lot of problems like employee’s health, fire outbreak, burglary and others numerous to mention.

• OBJECTIVES OF THE STUDY

The main objective is to examine the impact of risk management on the effectiveness of small scale business in Nigeria.

Others specific objectives includes;

1. To evaluate the risk facing small scale enterprises in Nigeria.
2. To establish the type of insurance policies suitable for small scale business.
3. To evaluate risk management applicable on small scale enterprises.
4. To analyze how risk management have an improvement on the identification of opportunities and threats in a small scale businesses

• SCOPE OF THE STUDY

The study will focus mainly on the consequences of application of risk management to small enterprises in Nigeria.

• RESEARCH QUESTIONS

1. What are the risk facing small scale enterprises in Nigeria?
2. Is risk management applicable to small scale business in Nigeria?
3. Which type of insurance policies are suitable for small scale business?
4. How does risk management have an improvement on the identification of opportunities and threats in a small business

• STATEMENT OF HYPOTHESIS

Hypothesis I

H₀: Risk management does not improve identification of opportunities and threats in a small scale business.

H₁: Risk management improves identification of opportunities and threats in a small scale business.

Hypothesis II

H₀: Risk management does not establish a reliable basis for loss control in a small scale business.

H₁: Risk management establishes a reliable basis for loss control in a small scale firm.

Hypothesis III

H₀: Risk management does not effectively increase profitability in a small scale company.    

H₁: Risk management effectively increases profitability in a small scale company.

• LIMITATIONS OF THE STUDY

The limitation of this study includes some problem or constraint encountered.

Time to get all the information is not there.

Some of the respondents are not willing to response to the questionnaires, because some are afraid.

Financial limitation which led to the inability to provide all the material that is needed in this study.

• SIGNIFICANCE OF THE STUDY

A study on risk management among small scale enterprise will immensely enable small scale operators to identify the various level of risk that are prevalent in the industry.

Small business plays an important role in the economic development to a nation. This fact has made it imperative to undertake this study and to create the awareness of the  promotion of the survival and economic viability of these ventures through the reduction of risk that tend to stifle their growth.

Finally, the study is not only intended to highlight that risk exists in small scale enterprise and its strategies but also boost studies in this area and to serve as encouragement to other students to carry out further research in this field.

1.9.  DEFINITIONS OF TERMS

MANAGEMENT: According to F.W. Taylor- Management is an art of knowing what to be done and seeing that it is done in the best possible manner.

BUSINESS: Lewis Henry defined business as, human activity directed towards producing or acquiring wealth through buying and selling of goods.

RISK MANAGEMENT: According to Dickson and Stein (1999) defined Risk management as the identification, analysis and economic control of those risks, which can threaten the assets or earning capacity of an enterprise.

Pages:  88

Category: Project

Format:  Word & PDF        

Chapters: 1-5

Material contains Table of Content, Abstract and References.