Financial risk management practices in Small and Medium Enterprises (SMEs)

Title: A Study on the Financial Risk Management Practices in Small and Medium Enterprises (SMEs) Focusing on Indian SMEs Small and Medium Enterprises (SMEs) are the backbone of the Indian economy, accounting for nearly 45% of industrial output and 40% of exports, while providing significant employment opportunities. Despite their economic importance, Indian SMEs are often vulnerable to a wide range of financial risks—including credit, liquidity, operational, and market risks—due to limited resources, inadequate financial literacy, and minimal access to structured financial systems. This study explores the financial risk management practices adopted by SMEs in India, with a specific focus on enterprises operating in Delhi and its surrounding regions. The research aims to identify key financial risks faced by SMEs, assess current risk management strategies, evaluate the level of awareness regarding formal risk management frameworks, and propose actionable recommendations to enhance financial resilience. The research adopts a descriptive design, utilizing both primary and secondary data sources. Structured surveys and interviews with SME owners and financial managers were conducted to gather insights into risk perceptions and practices. Secondary data from existing literature and government reports provided context to the analysis. A purposive sample of 40 SMEs from manufacturing, retail, and service sectors was selected, and both qualitative and quantitative methods were used to analyze the data.