Vol.

10, Issue 38 (IV), April-June 2020

Page Nos. 312-318

A STUDY ON RISK MANAGEMENT PRACTICES OF

SMALL MANUFACTURING ENTERPRISES IN
VIRUDHUNAGAR DISTRICT Mr. Nagarajan Muthukrishnan*

ABSTRACT
Risk management is the continuing practice which helps in improving business operations, setting
resources, ensuring compliances, achieving higher degree of performance, enhancing financial constancy
and eventually avoid loses of enterprises. The managers are agreed with top management is highly involved
in management of risk, enterprise has risk management policy and guidelines, risks are identified and
responded by managers effectively, risk management practices are monitored regularly, risk assessment
methods are used as suggested by experts, sufficient trainings are given to employees for management of risk
and employees are encouraged to involve in developing activities for efficient management of risk,
Significant difference exits amid risk management practices and profile of small manufacturing enterprises.
Performance of small manufacturing enterprises is significantly, positively and moderately related with their
risk management practices. Thus, small manufacturing enterprises should clearly define activities for
management of risk and they must use advanced technologies for management of risk. Besides, small
manufacturing enterprises should motivate employees to participate in management of risk in outside of their
work.
Keywords: Management Practices, Performance, Risk, Small Manufacturing Enterprises

1.
Introduction Risk management is the practice of protecting

In present days, risk management is
expanded to deal non systemic and systematic risks
in all type of business activities across the globe
(Islam and Tedford, 2012). Risk management is the
continuous and integrated process of describing,
discovering causes, analyzing, monitoring and
implementing appropriate measures to deal various
categories of risk to attain balance among
opportunities and risks (Dickinson, 2001). Risk
management is the continuing practice which helps
in improving business operations, setting resources,
ensuring compliances, achieving higher degree of
performance, enhancing financial constancy and
eventually avoid loses of enterprises (O'Hara et al
2005). Risk management consists of identification,
assessment, monitoring and managing risk
efficiently and reporting (Vaughan and Vaughan,
2001).
*Ph.D. (Part-Time) Research Scholar, Alagappa Institute of Management, Alagappa University, Karaikudi., Tamil Nadu State.
Vol. 10 Issue 38 (IV) April to June 2020
resources of enterprises against unwanted losses due
to uncertainties that can affect their various
operations and performance (Lukianchuk, 2015).
Management of risk is one of the critical challenges
experiencing by all type of enterprises and it
attempts to discover risks associated with business
operations of enterprises (Mitchell, 1995).
Technological advancements, dynamics of business
atmosphere and new economic policy make
operations of business highly risky (Zoghi, 2017).
Understanding and locating, analyzing and
responding risks quickly are highly necessary for
existence (Barry, 2004) and sustainability of small
and medium sized enterprises because of their
constrained resources, structures and unique features
in comparison with large sized enterprises.
Furthermore, management of risk is playing a major
role in operational efficiency, reduction of cost of
312
operations, competitiveness and performance of
small sized enterprises. Hence, it is necessary to
study risk management practices of small
manufacturing enterprises.
2.
Review of Literature
Henschel (2010) found that identification and
assessment of risk, investment for management of
risk, inclusion of management of risk in business
plans and risk management practices at projects,
processes and organization levels were adopted and
performance of firms was positively related with
their management practices of risk.
Robert and Liebenberg (2011) concluded that firms
identified and assessed risks periodically and took
measures to avoid or minimize those risks.
Management practices for risk reduced costs and
increased operational efficiency of firms and were
positively related with performance of firms.
Jayathilake (2012) revealed that small and medium
enterprises managed their risk through efficient
business plans, identification, assessment and
application of tools to handle them. No significant
difference was there among type and ownership of
enterprises and business plan was positively related
with management of risks among enterprises.
Ehsan (2013) showed that firms used different
management practices in order to reduce various
kinds of risks and enhanced their performance and
performance of firms was positively and
significantly associated with their management
practices of risks.
Samugwede and Masiyiwa (2014) indicated that
small and medium sized enterprises identified,
assessed and executed practices for effective
management of risk and they did not have any
concrete policy for risk management and risk
management practices were significantly and
positively related with their performance and
success.
Mitka (2015) found that small and medium
manufacturing enterprises identified, assessed and
implemented practices for effective management of
risk. Risk management practices were directly
Vol. 10 Issue 38 (IV) April to June 2020
connected with performance of small and medium
manufacturing enterprises.
Krause and Tse (2016) concluded that management
practices of firms for risks reduced cost of
operations, increased competitiveness and enhanced
involvement of top management in managing risks.
Performance of firms had significant relation with
their management practices for risks.
Sifumba et al (2017) revealed that small and medium
enterprises understood significance of management
of risk to certain extent and they did not take
initiative for management of risk effectively and
they identified, evaluated and implemented
management practices for risk as per suggestions of
expert groups and it was significantly related to their
performance.
Yang et al (2018) showed that management practices
for risk among enterprises were significantly and
positively related with their performance and
competitiveness. Besides, it decreased cost of
operations and increased operational efficiency of
enterprises.
Olah et al (2019) indicated that small and medium
enterprises experienced financial and economical
risks and they had higher degree of experiences for
dealing risks through adoption of efficient
management practices for risks and they regularly
monitored those risks and managed efficiently.
3.
Objectives of the Study
i)
To study risk management practices of small
manufacturing enterprises.
ii)
To find difference amid risk management
practices of small manufacturing enterprises
and their profile.
iii)
To analyze relation amid risk management
practices and performance of small
manufacturing enterprises.
4.
Methodology
The present study is carried out in Virudhunagar
district. Managers of small manufacturing
enterprises are selected by employing random
sampling method. Data are gathered from 180
313
managers of small manufacturing enterprises like
Rice, Flour, Dhall, Edible Oil Mills, Matches,
Beverages, Tobacco Products, Jute, Cotton Wool,
Silk, Synthetic fibers, Textiles & Garment, Wood,
Paper, Pulp, Leather, Rubber, plastic, Chemical,
Metal & Mineral products, Foundry & Machinery
Parts, electrical apparatus, Transport & Automobile
Parts, Product Manufacturers through structured
questionnaire. Profile of small manufacturing
enterprises are examined by using percentages and
risk management practices of small manufacturing
enterprises are studied through mean and standard
deviation, ANOVA and t-tests are applying to find
difference amid risk management practices of small
manufacturing enterprises and their profile. Simple
correlation analysis is employed to analyze relation
amid risk management practices and performance of
small manufacturing enterprises.
5.
Results
5.1 Profile of Small Manufacturing Enterprises
The profile of small manufacturing enterprises is
shown in Table-1. From the table, it is evident that
58.89 per cent of small manufacturing enterprises
are running as sole proprietorship, 33.33 per cent of
them are having investment of Rs.20,00,001 –
Rs.30,00,000, 50.56 per cent of them are operating
in own establishments, 32.22 per cent of them are
providing employment for 21 – 30 people and 48.33
per cent of them are having annual turnover of lower
than Rs.5,00,000.

T a b le
-1 . P r o f ile oS fm a ll M a n u f a c t u r in g E n t e r p r is e s
P r o file N u m b e r P e r c e n ta g e
N a tu re o f O w n e r s h ip
S o le P r o p rie to rs h ip 106 5 8 .8 9
P a r tn e rs h ip 74 4 1 .1 1
In v e s tm e n t
B e lo w R s .2 0 ,0 0 ,0 0 0 46 2 5 .5 6
R s .2 0 ,0 0 ,0 0–1R s .3 0 ,0 0 ,0 0 0 60 3 3 .3 3
R s .3 0 ,0 0 ,0 0–1R s .4 0 ,0 0 ,0 0 0 41 2 2 .7 8
A b o v e R s .4 0 ,0 0 ,0 0 0 33 1 8 .3 3
E s ta b lis h m e n t
Own 91 5 0 .5 6
L eased 63 3 5 .0 0
R e n te d 26 1 4 .4 4
E m p lo y m e n t
L e s s th a n 2 0 38 2 1 .1 1
21– 30 58 3 2 .2 2
31– 40 49 2 7 .2 2
M o r e th a n 4 0 35 1 9 .4 5
A n n u al T urn o ver
L o w e r th a n R s .5 ,0 0 ,0 0 0 87 4 8 .3 3
R s .5 ,0 0 ,0 0–1R s .1 0 ,0 0 ,0 0 0 65 3 6 .1 1
H ig h e r th a n R s .1 0 ,0 0 ,0 0 0 2 8 1 5 .5 6

Vol. 10 Issue 38 (IV) April to June 2020 314

5.2. Risk Management Practices of Small Manufacturing Enterprises
The risk management practices of small manufacturing enterprises from managers' point of view are shown in
Table-2.
Table-2. Risk Management Practices of Small Manufacturing Enterprises
Risk Management Practices Mean Standard Deviation
Top management is highly involved in management of risk 3.90 0.83
Enterprise has risk management policy and guidelines 3.88 0.86
Activities for management of risk are well defined 3.29 1.14
Risks are identified and responded by managers effectively 3.86 0.89
Advanced technologies are used for management of risk 3.32 1.10
Risk management practices are monitored regularly 3.78 0.98
Risk assessment methods are used as suggested by experts 3.81 0.96
Sufficient trainings are given to employees for management of risk 3.74 1.04
Employees are encouraged to involve in developing activities for
3.84 0.92
efficient management of risk
Employees are motivated to participate in management of risk in
3.35 1.07
outside of their work
The managers are agreed with top management is highly involved in management of risk, enterprise has risk
management policy and guidelines, risks are identified and responded by managers effectively, risk management
practices are monitored regularly, risk assessment methods are used as suggested by experts, sufficient trainings are
given to employees for management of risk and employees are encouraged to involve in developing activities for
efficient management of risk, while, they are neutral with activities for management of risk are well defined, advanced
technologies are used for management of risk and employees are motivated to participate in management of risk in
outside of their work
5.3. Risk Management Practices and Profile of Small Manufacturing Enterprises
The relationship amid risk management practices and profile of small manufacturing enterprises is shown below as.
5.3.1. Risk Management Practices and Nature of Ownership
The relationship amid risk management practices and nature of ownership of small manufacturing enterprises is shown
in Table-3.
Table -3. Risk Management Practices and Nature of Ownership
Standard
Nature of Ownership N Mean t-Value Significance
Deviation
Sole Proprietorship 106 36.50 4.09
4.328 ** .000
Partnership 74 33.30 4.54
**
Significant in 1% level
Mean value of risk management practices for small manufacturing enterprises with sole proprietorship and partnership
are 36.50 and 33.30 consecutively. This reveals that risk management practices for small manufacturing enterprises in
sole proprietorship are better than partnership.
The t-value is 4.328 and it discloses that significant difference exits amid risk management practices and nature of
ownership of small manufacturing enterprises.
5.3.2. Risk Management Practices and Investment
The relationship amid risk management practices and investment of small manufacturing enterprises is shown in Table-
4.
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 Table-4. Risk Management Practices and Investment
Standard
Investment N Mean F-Value Significance
Deviation
Below Rs.20,00,000 46 32.46 4.01
Rs.20,00,001 – Rs.30,00,000 60 33.68 4.64
5.596** .000
Rs.30,00,001 – Rs.40,00,000 41 34.71 4.52
Above Rs.40,00,000 33 35.54 3.84
**
Significant in 1% level
Mean value of risk management practices for small manufacturing enterprises with investment of below
Rs.20,00,000, Rs.20,00,001 – Rs.30,00,000, Rs.30,00,001 – Rs.40,00,000 and above Rs.40,00,000 are 32.46,
33.68, 34.71 and 35.54 consecutively. This reveals that risk management practices for small manufacturing
enterprises with investment of above Rs.40,00,000 are better than other investments.
The F-value is 5.596 and it discloses that significant difference exits amid risk management practices and
investment of small manufacturing enterprises.
5.3.3. Risk Management Practices and Establishment
The relationship amid risk management practices and establishment of small manufacturing enterprises is
shown in Table-5.
Table -5. Risk Management Practices and Establishment
Standard
Establishment N Mean F-Value Significance
Deviation
Own 91 36.95 3.13
Leased 63 34.92 3.95 6.858 ** .000
Rented 26 32.08 4.57
**
Significant in 1% level
Mean value of risk management practices for small manufacturing enterprises operating in own, leased and
rented establishments are 36.95, 34.92 and 32.08 consecutively. This reveals that risk management practices
for small manufacturing enterprises operating in own establishments are better than other establishments.
The F-value is 6.858 and it discloses that significant difference exits amid risk management practices and
establishment of small manufacturing enterprises.
5.3.4. Risk Management Practices and Employment
The relationship amid risk management practices and employment of small manufacturing enterprises is
shown in Table-6.

Table-6. Risk Management Practicesand Employment

Standard
Employment N Mean F-Value Significance
Deviation
Less than 20 38 32.38 4.16
21 – 30 58 33.29 4.18
6.105** .000
31 – 40 49 35.00 4.60
More than 40 35 36.40 3.86
**
Significant in 1% level

Vol. 10 Issue 38 (IV) April to June 2020 316

Mean value of risk management practices for small manufacturing enterprises providing employment to less
than 20, 21 – 30, 31 – 40 and more than 40 people are 32.38, 33.29, 35.00 and 36.40 consecutively. This
reveals that risk management practices for small manufacturing enterprises providing employment to more
than 40 people are better than other employments.
The F-value is 6.105 and it discloses that significant difference exits amid risk management practices and
employment of small manufacturing enterprises.
5.3.5. Risk Management Practices and Annual Turnover
The relationship amid risk management practices and annual turnover of small manufacturing enterprises is
shown in Table-7.
Table-7. Risk Management Practices and Annual Turnover
Standard
Annual Turnover N Mean F-Value Significance
Deviation
Lower than Rs.5,00,000 87 32.13 4.47
Rs.5,00,001 – Rs.10,00,000 65 33.94 4.40 6.741 ** .004
Higher than Rs.10,00,000 28 36.14 3.23
**
Significant in 1% level
Mean value of risk management practices for small manufacturing enterprises with annual turnover of lower
than Rs.5,00,000, Rs.5,00,001 – Rs.10,00,000 and higher than Rs.10,00,000 are 32.13, 33.94 and 36.14
consecutively. This reveals that risk management practices for small manufacturing enterprises with annual
turnover of higher than Rs.10,00,000 are better than other annual turnovers.
The F-value is 6.741 and it discloses that significant difference exits amid risk management practices and
annual turnover of small manufacturing enterprises.
5.4. Relation Amid Risk Management Practices and Performance of Small Manufacturing Enterprises
The correlation analysis is employed to analyze relation amid risk management practices and performance of
small manufacturing enterprises and the result is shown in Table-8.
Table -8. Relation amid Risk Management Practices and Performance of Small Manufacturing
Enterprises
Particulars Coefficient of Correlation
Risk Management Practices and Performance of Small
0.58 **
Manufacturing Enterprises
**
Significant in 1% level
The correlation coefficient amid risk management experts, sufficient trainings are given to employees
practices and performance of small manufacturing for management of risk and employees are
enterprises is 0.58 and it elucidates that both are encouraged to involve in developing activities for
positively and moderately related with each other. efficient management of risk, Significant difference
6.
Conclusion exits amid risk management practices and profile of
small manufacturing enterprises. Performance of
The above results demonstrate that the managers are
small manufacturing enterprises is significantly,
agreed with top management is highly involved in
positively and moderately related with their risk
management of risk, enterprise has risk management
management practices. Thus, small manufacturing
policy and guidelines, risks are identified and
enterprises should clearly define activities for
r e s p o n d e d b y m a n a g e r s e ff e c t i v e l y, r i s k
management of risk and they must use advanced
management practices are monitored regularly, risk
technologies for management of risk. Besides, small
assessment methods are used as suggested by
manufacturing enterprises should motivate
Vol. 10 Issue 38 (IV) April to June 2020 317
employees to participate in management of risk in
outside of their work.
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