As crises are increasingly protracted and fragility tends to persist, firms can strengthen their capacity to cope with the prevailing state of fragility while the state builds its capacity, including reforms for improved business environment, according to a flagship report of the International Trade Centre (ITC).
The report, Small And Medium Enterprises (SME) Competitiveness Outlook 2023, said interventions at the macro and micro levels must go together.
“It is fundamental to address the factors that drive fragility and restore the ability of the state and business ecosystem to perform their functions and cope with risks,” it said.
The new ITC report, “Small Businesses in Fragility: From Survival to Growth”, said firms can act to curb the impact of fragility by building competitiveness that can serve as a buffer to its impacts.
“When firms act to improve their competitiveness, they are likely to lower their exposure,” it said, citing the need to put in place internal measures to raise their competitiveness score.
The report said building firm capacity or increasing firm competitiveness requires enhancing their ability to operate in the day-to-day environment, build strong connections with actors in the business ecosystem and adapt to sudden market changes.
“These capabilities provide a solid foundation for business resilience. Firms with critical competitiveness characteristics tend to fare better during crises,” it said.
The report further said it is also important to build state capacity, including reforms involving the business environment that remove barriers to entry and operation – reliable infrastructure and related services, fewer procedural complexities and better economic governance.
“Here, the goal should be to create a supportive business environment, in which entrepreneurs can thrive and grow in both size and number,” it said.
In fragile settings, micro, small and medium-sized enterprises comprise 90 percent of all businesses, with a stronger presence of smaller firms.
“With proper support, they have greater chances of coping with fragility, helping sustain the livelihoods of millions. If they are set on a growth trajectory, they are more likely to take off once stability starts taking hold and the business environment begins to improve,” it added. – Press release