A risk management framework for fast moving consumer goods retailers in South Africa

Abstract

This paper investigated the risk management practices of FMCG SMEs in the Cape Metropolitan Area in an attempt to fill the knowledge gap on risk management and sustainability of SMEs. This study used a mixed methods approach. The data from 320 SME owners and managers operating in the FMCG sector of the Cape Metropolitan Area were collected through a standard questionnaire. In order to validate the quantitative data gathered through a questionnaire-tool, qualitative data were collected by interviewing two risk experts. The findings revealed that FMCG SMEs have risk management mechanisms in place, but they are too simplistic and very informal. Even so, it was noted major that SMEs that existed for ten or fewer years tend to lack the crucial elements of a useful risk management tool kit as dictated by best practice. Aligned to this was the lack of budgetary control and contingency fund account in SMEs, lack of risk knowledge, and so forth. As such, this paper proposes a practical risk management frame that is aligned with the needs of FMCGs. The framework presented in this article is anticipated to serve as a practical risk management tool for use by SMEs since it was informed by the empirical results and best practice, as documented in the literature. This paper contributes to the risk management literature in the FMCG SME sector. In addition, this is a pioneering empirical study to investigate the existence of the crucial elements of a useful risk management tool kit in FMCG SMEs, as dictated by best practice.