Implementing ISO 31000:2018 for Enterprise Risk Management in MSMEs: Evidence from Purworejo Regency, Indonesia

Abstract

Micro, Small, and Medium Enterprises (MSMEs) face various risks that can impact business sustainability, ranging from limited capital to weak strategic planning. Despite their important role in the regional economy, risk management implementation in most MSMEs is still not systematic. This study aims to analyze the implementation of Enterprise Risk Management (ERM) based on ISO 31000:2018 to identify, evaluate, and formulate risk management strategies. The study used a mixed methods approach with a sequential explanatory design, through interviews, observation, documentation, and risk assessment using the ISO 31000:2018 likelihood-impact matrix involving 125 MSMEs in Purworejo Regency, Indonesia. The results show that the risks faced by MSMEs are dominated by strategic and financial risks. The priority level include the absence of a business plan, the absence of a business development plan, the absence of a business strategy, limited capital, and decreased production. Based on the evaluation results, recommended mitigation strategies include strengthening managerial capacity, developing a business plan, improving financial management, expanding access to financing, and collaborating with the government, financial institutions, and universities. This study shows that the implementation of ISO 31000:2018 can be an effective framework in supporting more systematic risk management, thereby increasing the resilience and sustainability of MSMEs.

Keywords: Enterprise Risk Management; ISO 31000:2018; Risk Management; MSMEs; Business Sustainability

JEL Classification: D81, G32, M21