Abstract:
Purpose – The purpose of the paper was to analyze the financial risk perception of owners/managers and to
link such perception to the performance of their ventures.
Design/methodology/approach – The paper employed PLS-SEM to analyze financial risks and its impact
on SMEs in the food processing sector. Financial risks data on the operational, market, technological, credit and
liquidity risks and financial performance including compliance, social and resource efficiency performance
were collected from 214 food processors in selected cities in Ghana. Higher-order constructs were employed in
assessing the relationship between financial risks and SME performance.
Findings – Financial risk spurs a firm’s financial performance. Increased financial risks cause firms to be
resource-efficient and compliant. Furthermore, an assessment of how the various performance indicators
interplay showed increased compliant improved social performance and vice versa.
Research limitations/implications – The paper looked at food processing firms in three major cities,
analyzing the financial risks of the businesses and their effect on their performance. Although, these cities have
the largest number of these firms, generalizing the findings from the study should be done taking into
consideration the scope of the study.
Practical implications – The study exposes owners/managers to the critical issues of financial risk, its
components and how this could impact on their operations. It expected that owner/managers in the food
processing sector would craft the necessary risk mitigating strategies to deal with the different financial risks
they face. For theoretical implication, the paper suggests the need to highlight the risk exposure of firms due to
the business–stakeholder interactions as contained in the stakeholder theory.
Originality/value– The paper employed the higher-order construct of PLS-SEM to analyze the financial risks
of food processors. The originality of the paper lies with the methods used.
