Small and medium enterprises have been the contributors to job creation, inflation eradication, and equal working opportunities for masses around the globe. SMEs have not only sped up economic growth and financial sustainability but also contributed to a great deal in liquidity of funds and money circulation among economies worldwide. SMEs have enabled entrepreneurs to discover smaller and almost unreachable niches in the global markets, operating through uncomplicated supply chains and limited working capital. These small businesses are easily adaptable to changes in the demands of the consumer base, and customization of products and services becomes more hassle-free in the case of limited enterprises.
According to 2023 statistics, SMEs in South Asia have eliminated almost half the population from below the poverty line by raising their standards of living and purchasing power over 5-10 years. SMEs established in homes and residential areas have contributed to a large extent in employing women and underprivileged parts of the population.
Despite all the goodwill and positivity attached to operational SMEs, there is a flip side of the picture. The pandemic, lockdowns, natural disasters, overpopulation, and most of all recent wars and instability in global politics have led to hyperinflation. Such circumstances have disadvantaged SMEs to a great extent and put a question mark on their sustainability and economic contribution to a nation’s progress. Recent turmoil has indeed created havoc for businesses and ventures throughout the globe, be it SMEs or market giants. Some of the risks and challenges that SMEs face today are:
1. Operational Hurdles:
In today’s world where even bread and butter is expensive in many economies, supply chain disruptions are a routine issue, the reason being expensive or insufficient supply, suppliers high pricing, raw materials storage and care, etc. Not just supply chain, general manufacturing, and production units might face unplanned downtimes and delays in repair due to limited funds and expensive spare parts. In the absence of contingency plans, these operational hurdles can become massively hazardous to the long-run performance of SMEs.
2. Trade Laws and Legislations:
Because SMEs are mainly dependent on local talent, skill, and even raw materials, trading and exports have added hefty amounts of revenues to their pockets in the past decades. However, owing to political instability almost everywhere, new trade laws have halted many SMEs from exporting and imposed heavy charges and royalties. Similarly, trade routes are blocked due to wars and political volatility in many parts of the world, making imported raw materials more expensive and also inaccessible in some cases.
3. Energy Crisis:
If inflation has hiked considerably, so has the shortage of renewable and nonrenewable resources. The reason is population abundance and catering to the food and water needs at every level of the human lifecycle. From carbon gas emissions to soil and air pollutants, the energy crisis is now a global problem, with businesses being partially responsible for not disposing of wastes properly, be it gases or solids. Market manipulation and local shortages as well as political tensions that disrupt oil and gas supplies from one place to another also pose potential risks for SMEs.
4. Cybercrimes and Thefts:
Another challenge for SMEs today is scrutiny of their over-the-internet operations, because of lesser investment in technology and IT tools to scan thefts, scams, and ransom wares. This is because small enterprises are more exposed to such crimes and data loss, as improper or insufficient investment and funds are allocated to IT integration and data protection software. Today, techniques like phishing are used to steal credit card information and other essential bank info leading to funds and balance theft, costing an SME sometimes colossal damages. Given the current risky cyber scenario, SMEs should make efforts to invest largely in cyber security as the customer base is mostly online now.
5. Inventory Management Challenges:
Though limited, inventory management may sometimes be an issue too. In today’s world, supply and demand keep varying and sometimes surplus or shortage is meant to occur within the stocked inventory of an SME. To manage such hassles, today many small enterprises have invested in small business inventory software and similar IT tools, which not only forecast possible inventory demand in the upcoming days but also manage the unneeded inventory through auction and selling. These services are now outsourced by many SMEs who seem to not have enough prudence about inventory issues and how to tackle them wisely.
6. Digitization of Businesses:
The greatest obstacle for traditional SMEs today is the digitized customer and overall internet-based businesses globally. This is because every customer wants products and services at their doorsteps instead of roaming around and searching for the desired item. SMEs that still have to assimilate IT infrastructure and assets within their operations and overall supply chains might need close supervision and a plethora of planning, forecasting, and obviously, investment. Such huge pooling of reserves needs time, and trustworthy investors who can provide funding timely. Though costly, once SMEs digitize partially or wholly, it can open new doors for small enterprises and entrepreneurs who wish to start businesses from a limited workforce and workspaces.
Conclusion
To conclude, it can be affirmed that SMEs have a long way to go when it comes to curtailing inflation-related risks and challenges. Overpopulation and scarcity of resources are some of the many factors contributing to hyperinflation and if not undertaken within time, the economic contribution by SMEs would not only be lessened but the overall presence and operations of SMEs would be at stake worldwide. Entrepreneurs and small business owners must make investments wisely and use funds according to needs instead of following traditional business strategies.
