Assessing Financial Risk Management Strategies among Small and Medium Enterprises (SMES) in Lusaka’s Industrial Sector

This study examines financial risk management (FRM) strategies among small and medium enterprises (SMEs) in Lusaka’s industrial sector within a context of persistent macroeconomic volatility. SMEs play a central role in Zambia’s economy, yet remain highly vulnerable to financial risks such as inflation, exchange rate instability, high interest rates, and limited access to finance. Guided by a pragmatic research philosophy, the study adopts a cross-sectional mixed-methods design, combining quantitative survey data with qualitative insights from key informant interviews. The research is anchored in Enterprise Risk Management (ERM) theory, contingency theory, and the resource-based view. Descriptive findings indicate that SMEs face high exposure to market risks alongside moderate-to-high exposure to liquidity and credit risks. Regression analysis demonstrates a statistically significant positive relationship between structured FRM practices and financial outcomes (R² = 0.49), indicating that effective risk management enhances financial resilience. However, qualitative evidence shows that many SMEs rely on informal and reactive strategies due to low financial literacy, high collateral requirements, and limited institutional support. The study concludes that inadequate and informal FRM practices undermine SME sustainability and recommends strengthening financial literacy, improving access to finance, and promoting structured risk management frameworks tailored to SMEs.