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    10 risk trends affecting SMME’s

    Sep 15, 2021 | Articles, Other articles

    Small, Medium and Micro Enterprises (SMME’s) employ around 80% of Africa’s workforce in both the formal and informal sectors but Covid-19 has devastated the world and economies everywhere are still trying to find their feet. South Africa is no exception. While South Africa’s SMMEs are one of the hardest hit by Covid-19 they are facing even more threats. Some of these threats include:

    1. Changing consumer buyer behaviour

    Consumer buyer behaviour has never been static. It has steadily changed throughout the years but never as rapidly as it is changing now. Covid-19 has altered consumer buyer behaviour in a way that might be irrevocable.  

    According to Clayton Ellary from Aon South Africa’s Commercial Risk Solutions Division, innovation is a necessity, not an option. He states that “it also means that disruptive technologies, such as artificial intelligence, blockchain, or the Internet of Things may be the key to transforming the current playing field. Start-up companies tend to be more agile in their efforts to meet the changing needs of consumers. The fine line between success and failure is defined by an organisation’s ability to reinvent itself in an ever-changing market where disruption is fast becoming the norm.” 

    2. Technological reliance 

    The recently released Servcorp Good Business Study has shown that too much reliance on technology is potentially threatening the art of good business. With South Africa heading into the Third Wave of Covid-19 technological reliance is ever-increasing as social distancing protocols have changed the way humans react to their world and each other.  

    With this happening in the context of the Fourth Industrial Revolution, SMMEs also need to be careful of their potential vulnerabilities in the digital world. Not only do they need to protect the privacy of their stakeholders in accordance with the POPI Act and the Consumer Protection Act, but they also need to establish a robust cyber-security system. SMMEs might implement a cyber-security system like ISO 27001: 2013 which provides a framework for the control and development of an Information Security Management System for an organisation.  

    3. The rise of intellectual property 

    Intellectual property and information are some of the intangible assets in a business that needs to be protected. For SMMEs this is another one of the places where they find themselves at risk.  

    “We currently find ourselves in a business environment where a huge shift is taking place from tangible to intangible assets, making it crucial for companies to identify what their value-producing assets are and to re-evaluate their risk and liability in this space,” says Ellary. 

    4. The Resilient workforce 

    The skillset of employees and other stakeholders is pivotal to the success of SMMEs in South Africa. What is happening, however, is employees are upskilling and moving to bigger organisations with their experience. Arguably, the failure of SMMEs is not due to a lack of funding but a lack of skills.  

    5. Liquidity 

    Liquidation is a threat to all businesses but is particularly threatening to smaller organisations. It has always been a threat, but it is exacerbated now with the spread of Covid-19 and changing consumer behaviour patterns. Many SMMEs are experiencing challenges and failure as they are not capable of dealing with extended financial troubles.  

    According to VentureBurn:

    “Despite being over its second wave, the South African economy continues to struggle, brand-new data by Statistics South Africa indicates. Released on 26 April 2021, the report shows that 216 companies liquidated in March this year, compared to 178 the month before – a 21% jump.” 

    6. Client dependence 

    For most small businesses one client makes up more than 50% of their income leaving them largely dependent on one source of revenue. SMMEs need to diversify their client base to reduce risk and possibly even survive. Since payment can be inconsistent, especially with larger clients, diversification is vital. 

    7. Money Management

    Cash flow is king. The mismanagement of funds could lead to a capital drain leaving small businesses at risk. Alongside this, the lack of proper infrastructure when it comes to accounting services and capabilities could be a reason not to expand as another resource is required.  

    8. Fatigue

    Since SMMEs are small an increasing load of work is placed on a small number of people. There is a fear, especially by founders, that if business elements are not micro-managed, they could fail leaving employees drained.  

    9. Founder dependence

    Many small businesses are founded by just one individual. Due to a lack of staff or an inability to delegate many SMME founders are unable to let go of certain decisions and responsibilities potentially hindering growth and putting their businesses at risk. 

    10. Balancing Quality and growth 

    As these businesses expand at some point is it important to sacrifice to grow. This could mean sacrificing the individual inspection of each product or reducing the amount of time invested in each client for example. 

    While there are very real threats in South Africa for SMMEs right now, there are means of managing risks like implementing the International Standard ISO 31000:2018, a risk management guideline.  

    What is ISO 31000:2018? 

    ISO 31000:2018 is a standard set out by the International Organisation of Standards which provides the regulations, principles, and Policies for managing risk. It was developed by a range of stakeholders and can be used by any organisation to effectively allocate and utilise resources for the treatment of risk.  

    Some of the benefits of implementing ISO 31000:2018 include: 

    • Creating a safe working environment for all stakeholders.  
    • Increasing business stability. 
    • Ensuring legal compliance. 
    • Protection from harmful events affecting the environment or the organisation itself.  
    • Including risk discussions in decision-making. 
    • Addressing uncertainty. 

    How can WWISE help? 

    You can implement ISO 31000:2018 with WWISE. WWISE has an array of trained professionals including consultants, engineers, and registered auditors. We provide on-the-job training and one on one coaching. WWISE also offers support to SMMEs. While starting an SMME is inherently risky there is no reason not to start one. With the main goal of profitability, WWISE assists with the development of progressive strategies for SMMEs, training all employees on all levels. There are multiple packages to choose from so enquire today. You can call us on 08610 99473 or 021 525 9159, or visit our website:  https://www.wwise.co.za  

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