SMEs’ resilience in the manufacturing sector: The role of formalized risk management and risk culture

Abstract

Based on an integration of the literatures in small business, risk management, organizational resilience, and management control, this article examines the impact of a risk-tolerant culture and formalized risk management on organizational resilience in small and medium enterprises (SMEs). Survey data were collected on 500 Canadian manufacturing SMEs and Partial least squares (PLS) analyses were used to test the hypothesized model. PLS results indicate that a risk-tolerant culture is positively associated with resilience, while formalized risk management is not. When focusing on the subset of firms that have formalized their risk management, both a risk-tolerant culture and formalized risk management are found to enhance resilience. However, these results hold only when environmental turbulence is low. Overall, our findings suggest that fostering a risk-tolerant culture is crucial for SMEs’ resilience, while the impact of formalized risk management on resilience depends on the firm context