Internal control processes and risk reduction in Harare's retail SMEs

Abstract

Progressively in the past few years, there has been a problem of high Small to Medium Enterprise (SMEs) failure rate. Much of the studies conducted have put forth much effort on availability, accessibility and cost efficiency in the utilisation of finances. Little attention has been paid to the great role played by the internal control systems in the performance of businesses. The research work aimed among others at determining the impact of internal control processes and risk reduction in SMEs which in turn influences efficiency of these institutions.A survey research design was embraced for this research study with a sample size of 121 SMEs selected;data was collected using questionnaires. Data analysis was done using SPSS Version 22 software and results findings tabulated for presentation and interpretation done. Five research questions were formulated out of which a hypothesis was formulated using regression co-efficient analysis method at 5% level of significance. The findings from the analysis indicate that internal control processes are necessary for risk reduction and effectiveness of SMEs institutions. Risk appetite of any organisation cannot be fulfilled without internal control processes built in within the organisational operational framework. The results established that there was a significant association between the internal control processes variables and risk reduction in SMEs. The study further concluded that accounting control and authorisation, approvals are more critical ingredients in realising risk reduction and associated failure rate elimination.