Risk Management: Key to Financial Management and Inclusion to SME Performance in the Digital Era

Abstract

This study examines the mediating role of risk management in the relationship between financial management, financial inclusion, and the performance of Small and Medium Enterprises (SMEs) in the digital era. Despite the increasing adoption of financial technologies and financial inclusion initiatives, many SMEs continue to face performance challenges due to unstructured financial management and exposure to business risks. Using data from 96 culinary SMEs in Makassar, Indonesia, and employing Partial Least Squares-Structural Equation Modeling (PLS-SEM), this study finds that financial management and financial inclusion alone do not directly enhance SME performance. However, when mediated by effective risk management, these factors significantly contribute to SME growth and sustainability. The findings highlight the critical role of risk management in mitigating financial and operational uncertainties, ensuring resilience, and enhancing overall SME competitiveness in the digital economy. This study contributes to the Resource-Based View (RBV) theory by demonstrating how risk management serves as a strategic resource that strengthens SME financial strategies. Policymakers, financial institutions, and SME owners should prioritize risk management frameworks to maximize the benefits of financial inclusion and improve SME financial sustainability. Future research should explore longitudinal studies and cross-industry comparisons to validate these findings across different business sectors.