Adoption of risk management practices and its impact on SME's financial performance

The study examines how the strategic integration of Enterprise Risk Management (ERM) and Performance Management Systems (PMS) improves decision-making processes, leading to financial stability and organizational resilience. This emphasizes the need to implement a comprehensive approach to risk management, ensuring that it aligns with the company strategy and organizational culture. The study adopts a multi-case research design and combines primary and secondary data-gathering techniques, including expert interviews and a comprehensive literature analysis. The research is grounded on the interpretivism philosophy, which aligns with the study's objectives of gaining a profound understanding of the subjective experiences and social realities inside small and medium-sized enterprises SMEs. The results demonstrate the ability to use financial knowledge and a culture aware of risks to enhance the effectiveness of ERM and PMS, thereby enabling strategic and well-informed decision-making. Keywords: Enterprise Risk Management (ERM), Performance Measurement Systems (PMS), Strategic Decision-Making, Financial Stability, Organizational Culture, Risk Management Integration