Risk perception of SMEs: strategic risks, family-related risks, external risks

Abstract

While risk perception is essential in understanding risk-taking behavior, the risk perception of Small- and Medium-sized Enterprises (SMEs) remains widely unexplored. Analyzing the current business situation of about 1000 German companies, we present stylized facts on the perception of risks. Our first result is that five out of twelve risks are dominantly perceived. The second result is a classification of all possible 4096 risk profiles into eight classes of ideal types of risk perception. Finally, we investigate which factors determine the probability of perceived risks using information on size, industry sector, and business situation of companies, together with data on their equity and family firm status. We use logistic regressions to investigate their impact. Data show that a good business situation lowers the probability of perceiving some of the strategic risks. We strongly argue to focus more strongly on risk perception for creating a better understanding of how SMEs take risks and manage uncertainty.