FINANCIAL RISK MANAGEMENT STRATEGIES FOR SMALL AND MEDIUM ENTERPRISES

Small and Medium Enterprises (SMEs) play a significant role in economic development by generating employment, promoting innovation, and contributing to national income. Despite their importance, SMEs face numerous financial risks that threaten business continuity and long-term growth. These risks include liquidity shortages, credit constraints, market fluctuations, operational uncertainties, foreign exchange volatility, and rising financing costs. Effective financial risk management enables SMEs to identify, assess, mitigate, and monitor these risks while improving financial stability and organizational resilience. This review paper examines major financial risks affecting SMEs and evaluates practical risk management strategies, including financial planning, cash flow management, diversification, insurance, digital financial technologies, and internal control systems. The paper also discusses the role of financial literacy, leadership, and government support in strengthening SME resilience. The findings suggest that proactive financial risk management improves profitability, enhances investor confidence, supports sustainable business growth, and increases the ability of SMEs to withstand economic uncertainty.