Strategies for mitigating exchange risk faced by small to medium enterprises for enhancing financial performance: a case of Valley Seeds

Author

Dapi, Precious

Title

Strategies for mitigating exchange risk faced by small to medium enterprises for enhancing financial performance: a case of Valley Seeds

Abstract

This study looks at how exchange rate risk affects the financial performance of SMEs in Zimbabwe, concentrating on Valley Seeds Private Limited, an agricultural company that produces and distributes seeds. SMEs are seriously threatened by Zimbabwe's unstable economic climate, especially its erratic currency, especially those that depend on imported inputs. The study's objectives were to determine how much financial exposure there was to exchange rate risk and how well risk-reduction tactics worked. A descriptive survey approach was used, and 30 Valley Seeds employees including managers, finance managers, accounts clerks, and the owner were given questionnaires. The study received 100% of the responses, which increased the validity and dependability of the results. The findings showed that most respondents reported losses ranging from 11% to 20% of yearly income, indicating that exchange rate fluctuations had a modest to large influence on financial performance. The most impacted areas were found to be cost structures and profit margins. Financial hedging was the most often used mitigation approach (56.7%), whilst supplier diversification and foreign reserve holding were less frequently used. A statistically significant correlation between financial performance and efficient exchange rate risk management was validated by regression analysis (R2 = 0.492, p < 0.001). The study did, however, also find significant gaps in internal knowledge and Accounting Information Systems (AIS) usage, which impede the uptake of more sophisticated risk mitigation techniques. In order to improve financial resilience, competitiveness, and long-term sustainability, the study concludes that exchange rate risk is a systemic problem for Zimbabwean SMEs and suggests a multi-pronged strategy integrating financial, operational, and technology measures

Date

June 2025

Publisher

BUSE

Keywords

Mitigating Exchange Risk

Small to Medium Enterprises

Financial performance

Valley Seeds

Supervisor

Nil