Navigating uncertainties: a tri-factorial evaluation of risk management adoption in MSMEs

Abstract

AbstractThe study explores the implementation of risk management in Micro, Small, and Medium Enterprises (MSMEs) in Indonesia, with the objective of enhancing their adoption and fostering sustainable business practices. Despite the overarching goal, many MSMEs in Indonesia still lag in the implementation of risk management. The research specifically targets MSMEs without existing internal control and risk management systems. The questionnaire was distributed to 200 MSME representatives through an online Google Form. Out of these, we received 140 completed responses. After a thorough review for completeness and relevance to the study criteria, 111 responses were deemed suitable for analysis, resulting in a response rate of 70%. After the data is obtained, it is analyzed using partial least squares using smart-pls 4.0. Relative advantage (RA) is the most influential indicator on Adoption of Risk Identification (ARI). Other important factors are complexity (COMX), and security (SECU) for MSMEs. Conversely, organizational readiness (OR) and competitive pressure (CP) were found not to have a significant impact on ARI, suggesting these are not primary factors in enhancing risk identification adoption and business sustainability. These findings provide insightful implications for the strategic prioritization of risk management components in the Indonesian MSME sector.

Keywords

• Internal control system
• enterprise risk management
• adoption of risk identification
• TOE framework
• sustainable development goals
• Eric Liguori, Florida State University, United States