Rethinking Risk Management in Times of Crisis: The Effect of Covid-19 on Small and Medium Enterprises in Scotland and Their Response

The Scottish economy was experiencing a steady growth prior the hit of the Covid-19 in early 2020, with the fast-spreading pandemic causing the Government to announce extreme lockdown measures with unprecedented impact on Small and Medium-Sized Enterprises. While some industry sectors in Scotland took a lighter hit, a large part of the organisations had to either adapt or completely disrupt the way they did business. As an essential aspect of their survival, Risk Management implementation was considered to be among the areas requiring the most significant acceleration.

With 343,535 SMEs operating in Scotland prior to the national lockdown, employing over 60% of the Scottish population, the impact on the Scottish small and medium businesses and their recovery is of massive importance with both business and academic implications, but also for future law enforcement and policy making.

Based on the official statistics reports by the UK and Scottish Governments, and a review of the available literature on how SMEs around the world have handled crisis events in terms of their Risk Management practices within the past 20 years, the author developed the hypothesis that Crisis Events Significantly Accelerate the Risk Management Within SMEs. The hypothesis was then tested via primary, primarily quantitative (with elements of qualitative) research, with an online survey distributed to 230+ SMEs in Scotland. The research tested and compared the SMEs risk management attitudes and behaviours prior and post the Covid-19 outbreak and also looked at their practices in relation to the industry sector they operate within.

While the study proved that there has been a positive change in a number of aspects and activities within the Risk Management practice of the SMEs, the performed statistical significance tests did not show enough evidence to prove the developed hypothesis, most likely due to the research being conducted too close to the time of the crisis event. Despite of failing to reject the Null Hypothesis that Crisis Events Do Not Accelerate the Risk Management Implementation Within SMEs, the research provides useful information on the current state of Risk Management practices implemented by Scottish SMEs, highlights the lack of confidence instilled within the SMEs that they can handle another crisis of similar significance, and provides directions for further research and improvements with the aim of helping the SMEs prepare better in order to mitigate the consequences of future crisis events.