Influences of Credit Risk Management on Financial Resilience of SMEs in Ghana

Abstract

The study highlights that SMEs in Ghana are particularly vulnerable to financial and credit risks due to customer breaches and their own inability to comply with financial obligations. In particular, the risks of liquidity and market did not prevail among SMEs in Ghana. The positive correlation between maintaining enough emergency savings and having an individual designated for cash approval suggests that organizational practices can improve financial resilience. However, the negative correlation with the cash forecasts regularly indicates an area for improvement. Future research could explore effective risk management strategies to reinforce the financial stability of SMEs in the region. The study reveals that small and medium-sized enterprises (SMEs) actively identify and evaluate potential risks as they integrate risk management into their daily operations. To improve your resilience, SMEs management is recommended to evaluate customer solvency before extending credit, develop financial strategies to comply with obligations, and implement health and safety measures. In addition, establishing a solvent reputation, investing in low-risk companies, and fostering a culture of risk awareness through effective communication are essential for effective risk mitigation.It suggested that SME owners and managers should implement robust credit scoring models that can reduce the likelihood of defaults and losses. SMEs should consider diversifying their loan portfolio across different sectors (people who take salaries from that repayment can be deducted from that source) and build strong links with borrowers through consistent communication in order to foster transparency and identification of the financial difficulties of borrowers.