How to manage your risk? (An MSME approach)

How to manage your risk? (An MSME approach)

Small and medium enterprises account for a significant proportion of manufacturing, services, exports and employment, and hence are major contributors to GDP. Considering the growth of SME sector in India, the Indian government implemented a lot of policies and also advised to public sector banks to achieve a minimum 20% growth yearly in financing SME units. Due to various risks faced by the entrepreneurs, they fall sick and become NPA in the accounts of banks.


MSMEs are operating in a highly uncertain environment. Some of the risks faced by the entrepreneurs were an erratic supply-demand fluctuation, capabilities of entrepreneurs and their partners, political uncertainties, work floor accidents, use of outdated technologies.


Some ways to reduce this risk exposure is by

  • Creating a reserve fund to deal with an emergency situation
  • Doing sufficient market research to predict their demand, supply fluctuations
  • Horizontal and vertical integration of channels
  • Insuring the company based on their nature of operations
  • Understanding the market leader, doing a gap analysis and meeting the expectation
  • Getting the help of consultants
  • Accounts keeping and having an external audit
  • Knowledge of government policies.

“Sense and deal with problems in their smallest state, before they grow bigger and become fatal” – Pearl Zhu.

Thus understanding the uncertainties and coming with the contingency plan is the efficient way to manage risk.

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