EFFECT OF RISK MANAGEMENT ON PROFITABILITY OF MANUFACTURING FIRMS IN NIGERIA. A STUDY OF GRAND CEREALS NIG. LTD
Main Article Content
Abstract
This research study was aimed at examining the impact of risk management on the profitability of manufacturing industries in Nigeria, focusing on the Grand Cereal industry in Plateau State. The study investigated the relationship between three independent variables, namely materials price fluctuation risk, operational risks, and supply chain disruption, and the dependent variable of profitability, proxied by return on equity (ROE). The research design employed in this study is a descriptive survey research design. The study population consists of active functional, strategic, and various lines managers in the Grand Cereal industry, Plateau State. A sample size of 384 respondents was selected using the Cochrane formula at a 5% level of significance. The data was collected through a questionnaire administered to the selected respondents. Data analysis was performed using descriptive statistics for the common sample and the Ordinary Least Squares (OLS) regression analysis. The findings of the study reveal a significant and positive relationship between return on equity (ROE) in the manufacturing industry and three key risk management factors: operational risk management, supply chain risk management, and material pricing risk management. These findings emphasize the importance of effectively managing operational risks, such as process efficiency and safety measures, to enhance financial performance. Based on the results, it was concluded that manufacturing firms that prioritize operational efficiency, safety measures, and risk mitigation strategies can expect improved profitability and stronger returns on equity. The study recommended that manufacturing firms leverage the positive and significant relationship between operational risk management, supply chain risk management, material pricing risk management, and return on equity (ROE) to strengthen their financial performance. Furthermore, optimizing material procurement strategies, minimizing the impact of price fluctuations, increasing resilience, and gaining a competitive edge in the industry are crucial recommendations for manufacturing firms to enhance their profitability.
Article Details
Section
References
Yero, U. T. & Hamisu, M. M. (2023). A Review review of the Performance performance of Nigerian Manufacturing. African Scholars Journal of Business Dev. and Management Res. (JBDMR-7), Vol. 28 No. (7),
Abiodun, O. E., Sgbenu, N. and Oluseye, O. (2017). Factors Affecting Contractors’ Performance in Construction Project Delivery in Akure, Ondo State, Nigeria. Journal of Knowledge Management Economics and Information Technology, 7(4), 1-23
Adebayo, S. I. and Onyeiwu, C. (2018). The Determinants of Profitability of Manufacturing Firms in Nigeria, International Journal of Economics, Commerce and Management, 6(4): 479-493.
Akinleye, G. T. and Olanipekun, C. T. (2021). Risk Management and Financial Performance of Manufacturing Firms in Nigeria, Financial Risk and Management Reviews, 7(1): 67-77. http://doi.org/10.18488/journal.89.2021.71.67.77
Almasarweh, M. S.; Al-Rawashdeh, O. M.; AL Wadi, S.; Alnawaiseh, M. B. and Al-Rawashdeh, F. (2022). Risk Management and Financial Performance of Insurance Companies in Jordan, Social Space Journal, 22(01): 112-142.
Ayeni, T. Y. and Emeka, H. O. (2021). Financial Risks and Performance of Listed Manufacturing Firms in Nigeria, Journal of Public Administration, Finance and Law, 22: 156-163. https://doi.org/10.47743/jopafl-2021-22-11
Bagherzadeh, S. and Jöehrs, M. S. (2015). Reducing the risk of supply chain disruptions. MIT Sloan Management Review 55, 73–80.
Banjoko, S.A. (2000). Production and Operations Management, Saban Publishers, Lagos.
Brooking (2018). “Global Manufacturing Scorecard: How the US Compares to 18 Other Nations.” Tuesday, July 10.
Business Day (October, 2021). Manufacturers profitability pressured as production cost intensifies
Diehl & Spinler, 2013). Arriving at the high-growth firm. Journal of Business Venturing, 18, 189-216
Emma, B. and Gabriel, O. B. (2012). Introducing Risk Management Process to a Manufacturing Industry. Master thesis in identification of risk avoidance strategies at Coca Cola Enterprises Sweden
Evans, E. (2014). Are profit and profitability the same thing? An FE939 document on a series of the Food and Resource Economics Department, UF/IFAS Extension. https://edis.ifas.ufl.edu
Fadun, O. S. and Oye, D. (2020). Impacts of Operational Risk Management on Financial Performance: A case of Commercial Banks in Nigeria. International Journal of Finance and Banking Studies, 9(1): 22-35
Fama, E. (1970) Agency problems and the theory of the firm. Journal of Political Economy, 88, 288-307.
Frankl, D. G., Galonske, S. K. and Schmitz, G. K. (2015). An empirical investigation into material cost vulnerability. Journal of Purchasing & Supply Management 12, 301–312.
Freeman, E. (1984). Strategic Management: A Stakeholder Approach; Second edition, Tata McGraw-Hill, New York city.
Gujarati, D. & Sangeetha, N., (2007). Basics Econometrics; Fourth edition, Tata McGraw-Hill, New York city.
Ibegbulem, A. B. and Okorie, C. (2015). Assessment of Materials Management and Profitability of an Organization, Journal of Policy and Development Studies, 9(3): 153-165
Institute of Risk Management (2012).Mezgebe, T. T., Gebreslassie, M. G., Sibhato, H. & Bahta, S. T. (2023). Intelligent manufacturing eco-system: A post COVID-19 recovery and growth opportunity for manufacturing industry in Sub-Saharan countries. Scientific African, Vol. 19
Jacobs, R.F., Chase, R.B. and Aquilano, N.J. (2009). Operations and Supply Management, McGraw Hill Boston.
Jüttner, U., Peck, H., Christopher, M., 2003. Supply chain risk management: Outlining an agenda for future research. International Journal of Logistics: Research and Applications, 6, 197–210.
Kerongo, M. M. and Mwaura, R. W. (2016). The Effect of Operational Risk Management Practices on the Financial Performance in Commercial Banks in Tanzania, American Journal of Finance, 1, 1(6): 29-39.
Mezgebe, T. T., Gebreslassie, M. G., Sibhato, H. & Bahta, S. T. (2023). Intelligent manufacturing eco-system: A post COVID-19 recovery and growth opportunity for manufacturing industry in Sub-Saharan countries. Scientific African,. 19
Mohammed, H. K. and Knapkova, A. (2016). The Impact of Total Risk Management on Company’s Performance. 19th International Conference Enterprise and Competitive Environment 2016, ECE 2016, 10–11 March 2016, Brno, Czech Republic. Social and Behavioral Sciences 220: 271-277
NBS (2014). Nigerian Manufacturing Sector: Summary Report, 2010-2012. 14th October
NBS (2022). Nigerian Manufacturing Sector: Summary Report, 2020-2022.
Okeke, M. N., Aganoke, C. U., & Onuorah, A. N. (2018). Operational Risk Management and Organizational Performance of Banks in, Edo State, International Journal of Academic Research in Economics and Management Sciences, 7(4): 103-120. http://dx.doi.org/10.6007/IJAREMS/v7-i4/5187
Panday, P. N. and Panday, S. (2018). Managing Supply Chain Risk through Coordination or Collaboration among the Supply Chain Partners - to ensure Profitability and Continuity: A Research Review Paper delivered during the GCeMP2k18 (10th International Conference on Emerging Perspectives, Practices and Research Trends in Global Business Management) organized on March 17, 2018 by Faculty of Management Studies on a theme of "Global Business Management", at the V. M. Patel Institute of Management, Ganpat University, Ganpat Vidyanaga, Gujarat, India
Puspitaningtyas, A. (2017). Estimating systematic risk for the best investment decisions on manufacturing company in Indonesia, Investment Management and Financial Innovations, 14(1): 46-54.
Rejda, G. E. (2003). Principles of Risk Management and Insurance. Addison-Wesley Series. Amazon.com
Res, I. J. A., Sa, K., & Gemechu, D. (2016). Risk management techniques and financial performance of insurance companies. International Journal of Accounting Research, 4(1): 1-5.
Rumelt, R. (2002), The Electronic Reorganization of Industry, London: ICK Publishers.
Sodhi, M.S., Son, B.G, Tang, C.S. (2012). Researchers’ perspectives on supply chain risk management. Production and Operations Management, 21: 1–13.
Toshniwal, R. (2016). Concept of Profit and Profitability of Commercial Banks in India. 3rd International Conference on Recent Innovations in Science, Technology, Management and Environment, Indian Federation of United Nations Associations, New Delhi, India
Ugah, J. (2020). Financial Risks Management and Bank Profitability in Nigeria: Case of Access Bank of Nigeria Plc. International Journal of Research and Innovation in Social Science 4(9): 184-190
Vanguard (2022). “Contribution to Economy: Manufacturing Sector Stagnates”. November 30
Waddock, S. A. and Samuel, B. G. (1997). The Corporate Social Performance-Financial Performance Link. Strategic Management Journal, 18 (04): 303-319
Waddock, S. A. and Graves, S. B. (2006). Determinants of Operational Risk Reporting in the Banking Industry. The Journal of Risk, 9(1): 1-31
Wenk, F. (2005). Managing risk to avoid supply-chain breakdown. MIT Sloan Management Review 46, 53–62.
Yero, U. T. & Hamisu, M. M. (2023). A review of the performance of Nigerian Manufacturing. African Scholars Journal of Business Dev. and Management Res. (JBDMR-7), 28 . (7)
Zsidisin, G.A., 2003. A grounded definition of supply risk. Journal of Purchasing & Supply Management, 9: 217–224.