Risk Management in Latin American SMEs: A Proposal Based on Academic work run in Colombia, Mexico, and Peru

Abstract

SMEs play an important role in the economy, particularly in developing countries such as Latin America (Latam), since they generate between 25% - 40% of the national GDP, and generate among 60% - 70% of the total jobs. Nevertheless, their vulnerability is high, as it is expressed by the survival time, depending on economic conditions of the market, it expected 50%-60% them do not to overcome the first two years of operation, and only between 20% and 30% manage to consolidate and remain active after five years. This work is the result of a collaborative project between professors of Industrial Engineering and Production Engineering from Universities in Peru, Colombia, and Mexico, who proposed study the Latin American SMEs, try to understand their risk exposure, risk categorization, and challenges. Three risk categories have been defined: internal, external and meso, identify them by the decision-making that gave rise to the root cause of the exposure to risk. In total, 14 companies were interviewed from different sectors, 44% manufacturing, 38% commercial, and 19% service. The results indicate, in the case external risk, 56% are associated with inbound and outbound logistics and natural phenomena (e.g. earthquake), mainly in companies dedicated to the industrial sector. Among the internal risks, the most vulnerable sector is industrial, with 43% of these risks coming from operations and management. Among meso risks, the most vulnerable sector is that of commercial companies, accounting for 52% of administrative and information management risks.