Managing operational risk among SMEs: the Malaysian perspective

Despite being one of the integral components in fostering Malaysia’s economic growth, small and medium-sized enterprises (SMEs) have failed to attain their full potential due to various challenges. Based on the SMEs Masterplan 2012-2020, the Malaysian government has outlined six key challenges that could impede company performance excellence: innovation and technology adoption, infrastructure, access to financing, legal and regulatory environment, market access and human capital development. These challenges might lead to operational risks, which would likely lower the SMEs performance. The objective of this study is to examine the relationship between operational risk, risk mitigation strategy, and company performance. Specifically, this study focuses on Malaysia’s SMEs manufacturing industry by suggesting agility as part of a mitigation strategy towards enhancing their performance. Although the government has spent billions of Malaysian Ringgit, the impact on SMEs’ performance is still unimpressive, a situation prompting this study to be conducted. A total of 152 companies from the SMEs manufacturing industry in Peninsular Malaysia participated in this study. The data was collected through the survey method. The relationships between the variables were tested using Partial Least Square-Structural Equation Modelling (PLS-SEM) software. Statistical results reveal that a company performance can be significantly affected by innovation and technology adoption risk, along with legal and regulatory environment risk. Furthermore, agility is found to have a moderating effect on the relationship between innovation and technology adoption risk, infrastructure risk, and legal and regulatory environment risk. Overall, the research findings indicate that this analytical model provides a good understanding of the factors influencing the company performance and risk management in Malaysia’s SMEs manufacturing industry

Supply Chain Risk Management for the SME’s

Small and Medium Enterprises (SMEs) are a vital component in economic development and bring benefits to the country as they provide employment, increase income, and foster economic growth. However, SMEs have many shortcomings including small size, short capital, and reliance on support from the government. In addition, SMEs are usually companies that are less structured, with small management group, inadequately organised, as well as having informal risk management structure. This study argues for the benefit of adopting SCRM in Malaysian SME. Supply chain risk management (SCRM) focuses on supply chain risk phenomena and provides models for the analysis of several types of supply chain risks that occur in both supply and demand sides of the supply chains. The purpose of SCRM is to recognise the potential supply chain uncertainties and prevent the uncertainties with appropriate action. SCRM is made of four basic categories; risk sources, risk consequences, risk drivers, and risk mitigation strategies. This study focuses on risk mitigation strategies that should be implemented by SME to overcome challenges that they faced. The main problem is that there is lack of knowledge in the application of SCM, especially SCRM in the context of SMEs. In fact, there are still plenty of companies that have not establish a structured supply chain risk management and mitigation system and unaware of supply chain disruption risk management. Therefore, this study seeks to examine risk mitigation strategies and their effect on the company’s performance in Malaysian SME’s. Data was collected through survey questionnaire and the respondents consist of SMEs located in Malaysia. Data analysis was conducted using SPSS and findings indicate that there is significant relationship between risk mitigation strategies adopted by the SMEs and their company performance. DOI: 10.5901/ajis.2015.v4n1s2p15

Risk sources, agility strategy and company performance among manufacturing small and medium enterprises in Malaysia

Small and Medium Enterprise (SME), with its significant contribution to a country’s economy is gaining a corresponding interest from the research community. However, SMEs face numerous risks that could affect their performance resulting in its inability to rise to its full potential. Thus, this paper seeks to study the effect of risk sources (innovation and technology adoption risk, infrastructure risk and legal and regulation environment risk) towards company performance while introducing agility strategy in improving performance. Data was collected through a survey to Malaysian SME manufacturing companies yielding a response from 152 companies. Data were analysed using PLS-SEM. Findings indicate that innovation and technology adoption risk and legal and regulation environment risk have a significant effect on company performance. Meanwhile, the introduction of agility strategy does indicate a role in improvement of company’s performance in handling these risk sources. It would seem that agility strategy plays an effective role in mitigating risks therefore improving SME’s performance, contributing to knowledge of effective mitigating strategies in the field of risk management in supply chain for SMEs