A Literature Review: Effect of Enterprise Risk Management (ERM) Implementation on Micro, Small and Medium Enterprises (MSMEs).

Abstract

This article provides a comprehensive literature review on the impact of Enterprise Risk Management (ERM) implementation on the performance, resilience, and sustainability of Micro, Small, and Medium Enterprises (MSMEs). MSMEs are vital contributors to economic growth, employment, and innovation, yet they are particularly vulnerable to external shocks due to limited financial resources, weak internal controls, and dependence on owner-managers’ intuition. Traditional silo-based risk management approaches are considered inadequate in increasingly volatile and uncertain business environments. ERM is presented as an integrated and strategic framework that aligns risk management with corporate governance, objective setting, and performance management. The reviewed empirical evidence, especially from emerging economies, indicates that ERM adoption is generally associated with improved financial performance, sales growth, revenue stability, enhanced access to external financing, and stronger organizational resilience during crises such as global pandemics. However, the literature emphasizes that the benefits of ERM depend on the maturity level of implementation and the extent to which risk management is embedded in organizational culture and daily decision-making processes, rather than adopted merely as a formal compliance mechanism. The article also discusses commonly used ERM frameworks, determinants and barriers to adoption, including resource constraints and lack of expertise, and highlights managerial and policy implications. It concludes by identifying research gaps and calling for more longitudinal and cross-country studies to better understand the long-term value creation of ERM in MSMEs.