Effect of Risk Identification on Financial Performance of Small and Medium Enterprises (SMES) In Enugu State

• Post by: birpo
• December 24, 2025
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Orji, Lilian Uzoamaka ¹ & Prof. Oliver I. Inyiama ²

Abstract         

The study examines the effect of risk identification on financial performance of small and medium enterprises (SMEs) in Enugu State, with a focus on Return on Investment (ROI). The research used a Ex-post facto research, collecting data from 50 SMEs with consistent and accessible financial reports, covering sectors such as retail, manufacturing, and services. The study specifically investigates the impact of formal risk identification, the frequency of risk identification, and the number of risks identified on the ROI of SMEs. The results of the regression analysis reveal that formal risk identification (FRI) has a significant positive effect on ROI, with a t-statistic of 3.678 and a p-value of 0.0006, indicating that SMEs with formal risk identification systems tend to experience better financial outcomes. Similarly, risk identification frequency (RIF) shows a significant positive relationship with ROI, with a t-statistic of 2.635 and a p-value of 0.0112, suggesting that more frequent risk assessments contribute to improved financial performance. Furthermore, the number of risks identified (NRI) also positively impacts ROI, with a t-statistic of 2.452 and a p-value of 0.0178, emphasizing the importance of identifying a broad range of risks for better financial resilience. In conclusion, the study underscores the importance of formal and frequent risk identification processes in enhancing the financial performance of SMEs in Enugu State. SMEs that engage in structured and consistent risk identification practices are likely to experience improved ROI, reinforcing the need for SMEs to adopt comprehensive risk management frameworks for long-term financial success.

Keywords:  Risk Identification, Financial Performance, Return on Investment (ROI), SMEs, Enugu State.