The perception and preparation in terms of risk management of SMEs owners in Laos toward the joining of the ASEAN Economic Community (AEC)

Abstract

In the global market, many trade unions emerge to form negotiating and bargaining power across their market zone. One of the newest emerging unions among the ASEAN countries is also in the progress of integration. The ASEAN Economic Community (AEC) is a trade union as a result of the joining of 10 member countries in order to connect economies in ASEAN as one. As SMEs are the backbone of economies in all member countries, the union has brought about a free flow of goods, labour and investment in which the trading barriers to protect the home-country SMEs have to be reduced as the condition of joining.

As a result, many SMEs owners have encountered risks, which harm their businesses. To Lao SMEs, risk management is a new concept, and many firms still have no idea behind this concept. Therefore, this signals the need for survival by Lao SMEs regarding preparation in terms of risk management from the consequences of the AEC.

This research is conducted by aiming to understand how the Lao SMEs perception of the AEC affects their risk management. In addition, the examining of their knowledge about SMEs and the AEC are implemented. Furthermore, the research analyses their current risk management approach in relation to business strategy, finance, workforce and supply chain issues in an attempt to find out their readiness to overcome the challenges of the AEC. To accomplish and fulfil the aim and objectives, the semi-structured interview method in the qualitative approach to collect raw data is deployed in which 12 SMEs owners voluntarily participated in the interviews.

According to the findings, only a small number of Lao SMEs have risk management in their business strategy. However, their degree of risk management is low. From the simplistic lifestyle and culture, Lao firms only focus on daily operations without concern and being prepared for the upcoming risk of the AEC even though they are aware of the risks. Besides, when sceptically looking at their business strategy, finance, workforce and supply chain, it appears that business owners lack proper knowledge that is specific to these fields.

As a result, five adapted models are formulated as the guideline to strengthen Lao SMEs business plans. Finally, this project has answered all research questions and responded to all research objectives as well as managerial implications and recommendations from findings have fulfilled the gaps in academic research in the field of risk management in SMEs and in particular to Laos.