Risk Management of SMEs in the Republic of Croatia

Exposure to various risks in the business of companies and their impact on company performance creates the need for activities that reduce variability of cash flows that determine the company value. However, there are significant differences among companies in taking risk management activities. Therefore, beside the exploration of risk management practices, this study investigates the determinants of differences in risk management activities of small and medium size companies in the Republic of Croatia. Although the results of the analysis show that about half of the analysed companies apply some of the risk management methods, most often insurance, they also confirm insufficient expertise and lack of information on risk exposure and its management in these business companies. Management of market risk, pure risk, credit risk and operational risk is determined by various firmspecific and manager-specific characteristics.