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. Operational risk factors and the sustainability of small and medium manufacturing enterprises in South Africa

Author

Listed:
  • Urim-Tummim Shipanga

    (Cape Peninsula University of Technology, South Africa)

  • Suzaan Le Roux

    (Cape Peninsula University of Technology, South Africa)

  • Jobo Dubihlela

    (Cape Peninsula University of Technology, South Africa)

Abstract

In South Africa, the success of Small and Medium-sized Enterprises (SMEs) is essential in developing the economy as these businesses are known as drivers of economic growth. However, these SMEs have a high failure rate, mainly caused by operational risks. According to Scholarly literature, operational risk is any event that disrupts the normal flow of business processes. It generates financial loss or damage due to operational risk factors: people, process, system and external events. It was further established in South Africa that when these operational risk factors are not controlled, they can adversely impact the sustainability of SMEs. Most of these manufacturing enterprises do not implement operational risk management as they consider it a privilege of large enterprises. These Manufacturing companies must implement operational risk management to mitigate potential threats. This research study aims to investigate the operational risk factors affecting Manufacturing SMEs' sustainability in the Cape Metropole. Quantitative data was acquired from 85 respondents (managers/or owners) of Manufacturing SMEs in the Cape Metropole. Based on the results, it was found that all four of these operational risk factors still affect the sustainability of these business entities. To deal with these operational risk factors effectively, SMEs need operational risk management to identify, minimise and mitigate risks that negatively affect their sustainability.

Suggested Citation

  • Urim-Tummim Shipanga & Suzaan Le Roux & Jobo Dubihlela, 2022. ". Operational risk factors and the sustainability of small and medium manufacturing enterprises in South Africa," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 4(4), pages 126-139, December.
    • Handle: RePEc:ssi:jouird:v:4:y:2022:i:4:p:126-139
    DOI: 10.9770/IRD.2022.4.4(7)
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    References listed on IDEAS

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    1. Bhekabantu Alson Ntshangase & Steven Kayambazinthu Msosa, 2022. "Enhancing service delivery for metropolitan municipalities in South Africa via project management," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 4(3), pages 127-138, September.
    2. Wei Xing & Shanshan Ma & Xuan Zhao & Liming Liu, 2022. "Operational hedging or financial hedging? Strategic risk management in commodity procurement," Production and Operations Management, Production and Operations Management Society, vol. 31(8), pages 3233-3263, August.
    3. Ashwin Petersen & Juan-Pierré Bruwer & Suzaan Le Roux, 2018. "Occupational Fraud Risk, Internal Control Initiatives and the Sustainability of Small, Medium and Micro Enterprises in a Developing Country: a Literature Review," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(4), pages 567-580, AUGUST.
    4. Paul Saah, 2021. "The impact of small and medium-sized enterprises on the economic development of South Africa," Technium Social Sciences Journal, Technium Science, vol. 24(1), pages 549-561, October.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jaroslav Kollmann & Jaroslav Kollmann & Jarmila Straková & Antonín Korauš & Mykola Palinchak & Filip Černák, 2023. "Enterprise risk analysis in an engineering company with a focus on custom manufacturing," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 10(3), pages 362-382, March.

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    More about this item

    Keywords

    small medium enterprises; manufacturing SMEs; sustainability; operational risks; South Africa;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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