Abstract:
This study seeks to investigate the influence of both perceived risks and risk attitude on the
decision by entrepreneurs to adopt risk management strategies.Risk management remains
central to the day to day operations of small and medium enterprises, as these constantly need
to mitigate risks such as frauds, delinquencies, liquidity and staff turnover. To empirically test a
conceptual model of the relationship between the independent variables and the dependent
variable, structural equation modelling was employed. A five-point Likert scale questionnaire
was used to collect data from 288 small and medium enterprises, while to analyse the data and
confirm the existence and strength of conceptualised relationships, a confirmatory factor
analysis and a structural equation analysis were conducted. The results of the study provided
rather a disparity from the general stereotypical perception about small and medium
enterprises, that they largely seek and embrace risk and that they are poorly ranked in terms of
risk management adoption. The findings of the study confirm that both perceived risk and risk
attitude have a positive and significant relationship to the adoption of risk management
strategies by entrepreneurs. In order to enhance adoption of risk management strategies by
SMEs, it is important that the perceptions of owners and managers with regard to the
probability of occurrence, possibility of impact and severity of impact of a risk event, must be
altered.
