EFFECT OF FINANCIAL RISK MANAGEMENT ON FINANCIAL PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN HIRSHABELLE STATE-SOMALIA
Abstract
Firms are exposed to numerous financial risks which can greatly affect their performance. Despite the increasing exposure to risk events organizations view risk management as primarily a cost center and undervalue or under invest in integrated risk management practices. The purpose of this study was to study on the effect of financial risk management on the performance of SMEs in Hirshabelle state-Somalia. The study was guided by the following specific variable, effect of financial risk identification on financial performance of small and medium enterprises in Hirshabelle state-Somalia, effect of financial risk analysis on financial performance of small and medium enterprises in Hirshabelle state-Somalia, effect of financial risk monitoring on financial performance of small and medium enterprises in Hirshabelle state-Somalia, and effect of financial risk mitigation on financial performance of small and medium enterprises in Hirshabelle state-Somalia. This study was conducted through the use of cross-sectional survey research design. The target population included the 2,657 SMEs in Hirshabelle state-Somalia. Stratified sampling technique was used to ensure that the target population was divided into different homogeneous strata Random sampling technique was used. The study had a sample size of 348 respondents. The study did a pilot of 10% of the respondents who did not take part in the study. The researcher used internal consistency measure known as Cronbach’s Alpha (α) where the recommended value of 0.7 and above as a measure of reliability. Data was analyzed using the descriptive statistics with the help of data analysis software - Statistical Package for Social Sciences (SPSS version 23). Multiple regressions helped the researcher identify the relationship between financial risk management factors and financial performance of small and medium enterprises.
Key terms: Financial risk identification, Financial risk analysis, Financial risk monitoring, Financial risk mitigation, financial performance, Financial Risk Management, Risk Acceptance, Risk Avoidance, Risk Limitation, Risk Transference
CITATION: Ahmed, M. A., Mukhongo, A., & Datche, E. (2019). Effect of financial risk management on financial performance of small and medium enterprises in Hirshabelle State-Somalia. The Strategic Journal of Business & Change Management, 6 (2), 1563 –1577.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i2.1203
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