International Journal of Advanced Engineering Research and Science (IJAERS) Peer-Reviewed Journal ISSN: 2349-6495(P) | 2456-1908(O) Vol-8, Issue-5; May, 2021 Journal Home Page Available: https://ijaers.com/ Article DOI: https://dx.doi.org/10.22161/ijaers.85.50
Risk Implementation Aid model for Technical factors in Developing Countries’ informal SME Djamil Mohamed School of Management, Wuhan University of Technology, Wuhan, P.R.China
Received: 26 Feb 2021; Received in revised form: 21 Apr 2021; Accepted: 11 May 2021; Available online: 31 May 2021 ©2021 The Author(s). Published by AI Publication. This is an open access article under the CC BY license (https://creativecommons.org/licenses/by/4.0/). Keywords— Risk Implementation Aid, Integration knowledge, Integrated Risks Management, Informal Small & Medium Enterprise, , Technical factors.
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Abstract— The implementation of risk management plays critical role in an organization. The majority of SMEs find difficult to establish it in their organization. As important tools, the risk management factors can be eigther social or technical. And since most of these informal SMEs focus more on the technical engineering aspect of the society, this paper looking to find the technical factors that could positively influence the implementation of risk management. The purpose of this paper is the development of a Risk Implementation Aid Model with critical factors and constructs to help the process of implementing risk management. In general, the research is looking to answer our research question: “What are the technical factors for the successful implementation of RM in informal SME?”
INTRODUCTION
Risk management has historically been conducted in silos, in the sense that insurance risk, technical risk, financial risk, organizational risk, etc., have mostly been handled independently of one another and on department charts. This way of managing risks in silos has shown its limits, as evidenced by the numerous debacles we witnessed in the last two decades. As an example, we cite the recall of Toyota cars justified by defective accelerator pedals and the brake problem on the Prius. These difficulties are accompanied by considerable financial costs, loss of shareholder value, and worse still, severe damage to the firm’s reputation. Such an environment characterized by an increase in risks whose consequences go beyond what can be anticipated requires that managers adopt a global perspective on managing risks such as Enterprise Risk (ERM)(Rao, 2007). Over the years, we have seen the development of a new direction of risk management (ERM), called “integrated risk management,” in the sense that it is practiced throughout the enterprise. Already in 2003, more than 30 firms formalized ERM by designate a
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Chief Risk Officer (CRO) to lead their ERM program(Liebenberg & Hoyt, 2003). The first organizations to adopt ERM quickly realized that investment, growth, innovation, and technical changes are contributing significantly to increasing complexity as well as the diversity of risks(Rao, 2007). Indeed, according to Ernst & Young’s Board Members on Risk report, which dates from 2006, 72% of members believe that the total risk to which firms are exposed has increased by 41% in the last two or three years. As a result, the ad hoc or informal way of managing risks now seems unacceptable to them. These members also accept that in view of the changing market climate, the approaches available to them to date were insufficient. In addition, the need to comply with certain regulations, has led companies in the financial sector to take into consideration not only different categories of risks, but also the way whose multiple risks are managed and controlled throughout the organization. The ERM is part of this movement. Unlike traditional management, ERM makes it possible to manage a fairly large range of risks in an optimized way,
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