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Aboagye and Jones (1998) found that products or services of the small and medium enterprises are mainly for the domestic market. Few of them produce for the foreign market. The few products produced fails to penetrate the foreign markets due to stiff competition. Also, the issue of market competition does affect even the domestic products or services because of the dumping of products from foreign industries with financial strength, technology, and personnel.
According to Anderson (1998) small and medium enterprises have little financial muscles which do not allow them to operate under capital intensive technology. For instance, the technology used by these firms is very low due to the low cost of acquiring and operating the machines. In addition, Olu (2009) found that small and medium enterprises have a very small number of skilled workers who can operate machines efficiently and effectively.
World Bank (2010) points out that the business environment in most developing countries tends to comprise of unfriendly government regulations and policies which limit the small and medium enterprises from growing. Also, government regulations from the public regulators could be a solution even though in most cases they are not since government decision makers abuse power for their own self-interests. Peltzman (1976) and Stigler (1971) went on claiming that the majority of least developing countries regulations do not favour businesses in general. As a result, there are high tax rates, bureaucracy, and corruption which hinder small and medium enterprises from growth.
Herrington (2010) conducted a study in South Africa and found that managerial skills are a big challenge facing small and medium enterprises (SMEs). This is an outcome of inadequate education as well as training for the owners or managers of the small firms. As the study was reported on Global Entrepreneurship Monitor of the year 2001 up to 2010, showed the high rates of small and medium enterprises failed because of the insufficient managerial skills which brought very small numbers of surviving businesses in the country. In addition, the study about the small business owners and managers which was done in the Caribbean named the significant managerial skills such as competent administration, detailed planning and budgeting and lastly marketing activeness in general (Huck and McEwen, 1991).
In small and medium enterprises the managerial skills contribute a lot to business performances through a manager who possesses the skills. Such manager will help the firm to secure funds from various sources such as business angels, family members, and micro finances through the use of skills for example by preparing a sound business plan. The skills will also help business in gaining potential customers through various marketing plan strategies. Therefore, strategies and policies prepared by the skilled manager or owner will lead a business to win the qualified personnel for the firm (Papulova and Mokros, 2007).
It is inevitable taking risk management subject out of the small business contexts. Hence it cannot be taken for granted due to its importance in making sure the business’s prosperity does not occur accidentally. Ong (2006) defined risk management as “the systematic application of management policies, procedures, and practices to the tasks of establishing the context, identifying, analysing, assessing, treating, monitoring and communicating”.
Miller (1992) and Brustbauer (2014) claimed that small and medium enterprises are exposed to risks. Proper risk management enables a firm to flourish because risks would be identified and prepared for once they fall due. However, poor risk management can expose the firm to risks which would terribly damage the business (Hollman and Mohammad-Zadeh, 1984). According to Marcelino-Sádaba, Pérez-Ezcurdia, Echeverría-Lazcano, and Villanueva (2014) most small and medium enterprises practices poor risk management or they sometimes fail to practice risk management due to challenges they face such as access to finance.
Solomon (1982) classified risks into two broad ways that is pure risk and speculative risk. Pure risk involves risk that contains the possibilities of only a loss or no loss for example earthquake. Speculative risk contains the possibility of profit or loss for example gambling. Pure risks are insured while speculative risks are not insured. Small and medium enterprises are faced with several risks such as pure risk, speculative risk, strategic risk, operational risk and financial risk (Fraser and Simkins, 2010).

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