INTERNAL CONTROLS SYSTEMS AND THE RISK PERFORMANCE CHARACTERIZING SMALL AND MEDIUM MANUFACTURING FIRMS IN THE CAPE METROPOLE

Year 2017, Volume: 9 Issue: 2, 87 - 103, 01.06.2017

J. Dubihlela Lisa Nqala

Abstract

In recent years, manufacturers are refocusing and intensifying their keenness on
the nature of risks within their operational environments. They are also concerned
about their risk exposures. Numerous stakeholders, including government, creditrating
agencies, stock exchanges, occupational agencies and institutional investors
are increasing their call for significant focus on effective risk oversight and
optimised risk performance. For the manufacturing firms, the primary focus is
production which exposes them to complex risks. This study investigates how
small and medium manufacturers are optimising their internal control systems in
order to mitigate risk. The study seeks to understanding how internal controls are
utilised by manufacturing SMEs to mitigate and prevent risks, and how internal
controls are implemented by manufacturing SMEs. The study is conducted on
selected manufacturing SMEs in the Western Cape, South Africa. The study
follows a qualitative research paradigm, adopting case-based interpretive
approach employed to support the data collection, data analysis and data
presentation methods. Manufacturing SMEs that are in process of implementing
effective internal controls within their businesses would have a better
understanding of the importance and value of preventing or mitigate risk. An
analysis of interviews with managers and owners from manufacturing SMEs
indicates that businesses that often create contingency risk plans, and implement internal control systems are less exposed to risk. Their risk-buffer strategies towards perceived risks helps them achieve higher risk performance.

Keywords

Risk control, internal controls systems, risk performance, manufacturing SMEs, South Africa