Adapting Approaches to Working Capital Management of Small and Medium Business in Conditions of Economic Uncertainty

Abstract

The article deals with the research on the impact of economic uncertainty, especially uncertainty of economic policy, on the development of small and medium business. Topicality of the research is stipulated by the drastic role of small and medium business as a driver of growth, employment and innovation in economy of developing countries with higher vulnerability of this segment to instability because of limited resources and access to financing. On the basis of theoretical approach systematization and analysis of empiric data the key channels of negative impact of uncertainty on small and medium enterprises were identified. On the sample of Russian enterprises the author empirically proved statistic change of financial cycle elements within periods of high uncertainty. Special attention was paid to the impact of uncertainty on managing working capital: it was shown that uncertainty increases financial cycle, aggravates the need in liquidity and weakens the link between efficiency of working capital management and profitability. The author proposed the lines of coordinated policy of developing countries to provide sustainability of the development of small and medium business, including measures aimed at optimization of working capital management, raising macro-economic stability and improving access to financing. The research underlines the necessity of adaptive approaches to managing working capital in conditions of volatility with regard to institutional specificities of developing economies.