RESEARCH ON THE RELATIONSHIP BETWEEN RISK PREVENTION AND ENTERPRISES PERFORMANCE IN SMALL AND MEDIUM ENTERPRISES IN HENAN, CHINA

Abstract

Small and medium-sized enterprises (SMEs) are vital to China’s economy but also vulnerable to risks that can threaten their survival. This paper investigates the impact of risk prevention on SME performance to provide evidence-based policy recommendations. Through a survey of 300 SMEs across major industries in Henan Province, we assess whether risk identification, assessment and mitigation activities can improve financial and operational metrics. While excessive risk aversion may curb entrepreneurship, firms that disregard risk management also jeopardize competitiveness. Our study aims to quantify the risk prevention strategies that optimize stability and returns for SMEs to inform managers struggling to balance growth with sustainability.

Our data reveals SMEs adopting a moderate approach to risk prevention see higher profitability, liquidity and efficiency gains compared to alternatives of very intensive or very minimal control frameworks. However, we find implementation quality also crucial - a targeted, customized focus tailoring safeguards to address firm-specific hazards outperforms one-size-fits all practices. Diversifying supply chains and revenue streams prove universally valuable. Overall, SMEs stand to achieve over 5% average increase in returns by dedicating resources to understanding risks, adapting operations accordingly and tracking metrics to refine responses – a meaningful boost to competitiveness.

Our paper underscores that risk management, far from a cost center, presents an opportunity to systematically strengthen SME vigor if pursued strategically. We showcase how targeted investments in identification tools and mitigation capacities can improve financial and operational performance. Equipping managers with actionable diagnostics on propitious levels and techniques is imperative as SMEs navigate uncertainty. Our work pioneer’s analysis of an understudied but vital driver of SME excellence with practical insights across strategy, technology and governance domains