Application of risk management processes in small and micro retail enterprises within the city of Tshwane Metropolitan Municipality, Gauteng: a case study

Abstract

Small and micro retail enterprises share a competitive space with large retailers that are well resourced, have established brands and view risk management as a vital tool for business sustainability. The failure rate of small, medium and micro enterprises (SMMEs) is estimated to be between 70% and 80% (Adeniran and Johnston, 2011). Positioning in the shared competitive space has, therefore, become a challenge for many small and micro retail enterprises due to various obstacles and factors. In reality, the competitive space has contracted. As a result, what used to be a traditionally successful small business in the market space may not be relevant due to the global shift, emerging risks and customer perceptions of price, value and quality. The world is riskier and risks are inherent. This research study focused on how small and micro retail enterprises in the City of Tshwane Metropolitan Municipality (CTMM) effectively applied risk management processes to manage the obstacles and factors that cause failure. A qualitative research design, using a semi-structured interview tool and observations provided sufficient data on three small and micro retailers in the City of Tshwane (CoT) Central Business District (CBD). The study revealed that the small and micro retailers faced internal and external risks in the CoT. However, the risk management processes consisted of fragmented processes that were reactive, did not consider risks on the total enterprise level, did not conduct risk assessments, did not select appropriate risk responses and did not formulate business objectives. Moreover, the participants of the small and micro retailers lacked risk awareness, types of risk and risk management, and they had not attended training. As a result, they were not aware of the comprehensive benefits of managing risks in their enterprises. The study recommended that in order to improve their chances of survival, the small and micro retailers should implement risk management processes effectively.