Do Dutch SMEs Manage Financial Risk Rationally? Implications from an Empirical Study

During the past decades, risk management became a safeguarding principle for management in organizations. Several models were developed, evaluated, and implemented. Research of risk management, state the professionalism at firms regarding risk management and explore determinants that explain the conceived level of risk management. The firm’s size and the level of education of the risk manager seem to determine the level of risk management at individual organizations. Rational operating organizations are expected to level their risk exposure with the level of financial risk management. Our research shows at Dutch SMEs the level of risk is not aligned with the effort put into managing these financial risks. Empirical results show that none of our 8 selected risk factors are significantly related to the level of financial risk management. This implies Dutch SMEs do not rationally manage their financial risks.