Model of business risks and their impact on operational performance of SMEs

Abstract

Risks can negatively affect not only internal processes within a company and business results but also managerial decisions. One of the preconditions for sound decision-making would be the identification of specific risks. The primary goal of this paper is to create a structural model for exploring the interrelationships among sources of business risks and the operational performance of SMEs. A survey was conducted in 1,781 SMEs from selected Central European countries. CFA (Confirmatory Factor Analysis) was used to check the reliability and validity of the model. The Cronbach's alpha test was used to assess the internal consistency of data collection instruments. For measurement of sample adequacy, Kaiser-Meyer-Olkin (KMO) test was used. The model presented in this paper provides a tool for identifying the interrelationships among sources of business risks, operational performance and the market position. The model can help managers of SMEs focus on specific areas of their business that should not be ignored in decision-making processes.