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The influence of operational risk on the sustainability of manufacturing small and medium enterprises in the Cape Metropole
Author(s)
Shipanga, Urim-Tummim Saima
Date Issued
2021
Type
Thesis
Publisher
Cape Peninsula University of Technology
Abstract
South African Small and Medium Enterprises (SMEs) are regarded as the driving force of
economic growth and play a particularly critical role in developing countries because they
contribute to a country's gross domestic product (GDP), create jobs and reduce poverty.
Nevertheless, most SMEs face different types of risk that are detrimental to their
sustainability, which, in turn, negatively affect economic growth. One of these major risks
that SMEs face is operational risk. Since operational risk causes are growing sporadically
and can harm the trustworthiness, status and finances of a business, it is essential to equip
business entities with the necessary knowledge and skills to recognise and manage risk
effectively to attain business objectives. To shed light on the preceding phenomenon, this
research study aimed to identify the extent to which operational risk influences the
sustainability of SMEs operating within the manufacturing sector in the Cape Metropole
The research fell within the ambit of the positivistic research paradigm. This approach was
realised by conducting a literature review to aid in the construction of a survey in order to
conduct empirical research by accumulating quantitative data from owners and/or managers
of SMEs in the manufacturing industry. Non-probability sampling methods, particularly that
of purposive sampling and convenience sampling, were used to select a representative
sample size of respondents. The survey comprised qualitative and quantitative questions to
evaluate the influence of operational risk on the sustainability of SMEs within the Cape
Metropole manufacturing industry. The quantitative data obtained was analysed using
descriptive and inferential statistics.
Based on the analysed data, it was discovered that most SMEs did not perceive themselves
to be facing operational risk, and consequently, they did not implement ORM. Almost half of
the respondents was not au fait with the term “operational risk”. Most of the respondents
agreed with statements relating to achieving business objectives and not encountering any
of the listed operational risks. Only some businesses indicated that they were adversely
influenced by operational risk factors, which did not seem to affect the sustainability of their
business because all of them had been in existence for about 15 years. Four major
operational risk factors were found to influence SME sustainability in all the SMEs that
implemented ORM: people, systems, processes and external risk.
Stemming from the above results, it is evident that the data gleaned from manufacturing
SME managers and/or owners is not in congruence with existing academic literature.
Therefore, it is recommended that further research be conducted to determine why
manufacturing SMEs have good sustainability rates despite not being fully aware of
operational risk and ORM. To increase ORM implementation in SMEs to mitigate the
average operational risk factors that adversely affect these business, it is proposed that
educational programmes are offered to assist SME owners and/or managers to recognise
and mitigate operational risk because this action could contirubte to and/or increase
business sustainability.
economic growth and play a particularly critical role in developing countries because they
contribute to a country's gross domestic product (GDP), create jobs and reduce poverty.
Nevertheless, most SMEs face different types of risk that are detrimental to their
sustainability, which, in turn, negatively affect economic growth. One of these major risks
that SMEs face is operational risk. Since operational risk causes are growing sporadically
and can harm the trustworthiness, status and finances of a business, it is essential to equip
business entities with the necessary knowledge and skills to recognise and manage risk
effectively to attain business objectives. To shed light on the preceding phenomenon, this
research study aimed to identify the extent to which operational risk influences the
sustainability of SMEs operating within the manufacturing sector in the Cape Metropole
The research fell within the ambit of the positivistic research paradigm. This approach was
realised by conducting a literature review to aid in the construction of a survey in order to
conduct empirical research by accumulating quantitative data from owners and/or managers
of SMEs in the manufacturing industry. Non-probability sampling methods, particularly that
of purposive sampling and convenience sampling, were used to select a representative
sample size of respondents. The survey comprised qualitative and quantitative questions to
evaluate the influence of operational risk on the sustainability of SMEs within the Cape
Metropole manufacturing industry. The quantitative data obtained was analysed using
descriptive and inferential statistics.
Based on the analysed data, it was discovered that most SMEs did not perceive themselves
to be facing operational risk, and consequently, they did not implement ORM. Almost half of
the respondents was not au fait with the term “operational risk”. Most of the respondents
agreed with statements relating to achieving business objectives and not encountering any
of the listed operational risks. Only some businesses indicated that they were adversely
influenced by operational risk factors, which did not seem to affect the sustainability of their
business because all of them had been in existence for about 15 years. Four major
operational risk factors were found to influence SME sustainability in all the SMEs that
implemented ORM: people, systems, processes and external risk.
Stemming from the above results, it is evident that the data gleaned from manufacturing
SME managers and/or owners is not in congruence with existing academic literature.
Therefore, it is recommended that further research be conducted to determine why
manufacturing SMEs have good sustainability rates despite not being fully aware of
operational risk and ORM. To increase ORM implementation in SMEs to mitigate the
average operational risk factors that adversely affect these business, it is proposed that
educational programmes are offered to assist SME owners and/or managers to recognise
and mitigate operational risk because this action could contirubte to and/or increase
business sustainability.
Additional information
Thesis (MTech (Internal Auditing))--Cape Peninsula University of Technology, 2021
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