The Mediating Role of Risk Management in the Relationship between Financial Management, Financial Inclusion, and SME Performance in the Digital Era

Abstract

This study investigates 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. Using data collected from 96 culinary SMEs in Makassar City, Indonesia, this study employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to examine the proposed relationships. The findings reveal that financial management (β = 0.138, p = 0.102) and financial inclusion (β = 0.105, p = 0.355) do not have significant direct effects on SME performance. In contrast, risk management exerts a significant positive effect on SME performance (β = 0.599, t = 5.430, p < 0.001) and significantly mediates the relationships between financial management and SME performance (β = 0.137, p = 0.041), as well as financial inclusion and SME performance (β = 0.314, p < 0.001). These findings demonstrate that financial resources alone are insufficient to improve organizational performance unless they are supported by effective risk management capabilities. This study extends the Resource-Based View (RBV) by demonstrating that risk management functions as a strategic organizational capability that transforms financial management and financial inclusion into superior SME performance. The findings also provide practical implications for SME owners and policymakers seeking to strengthen business resilience and competitiveness in the digital era.