Abstract

The climate risk to small and medium enterprises (SMEs) is often multifaceted, and interaction among the various driving factors remains ambiguous. Examining these interrelationships improves the understanding of industry’s vulnerable areas and focuses on better cyclone disaster management. The present research aims to analyze the relationship between determinants of SME risk and tropical cyclones using the partial least squares structural equation model (PLS-SEM). The study examined the responses from 315 SMEs from Visakhapatnam on the East Coast of India. The results indicate that buildings and infrastructure (0.7) have a direct and cascading impact on SMEs risk, followed by employees and workers (0.4), process and production (0.34), and hazard likelihood (0.12), all at the significance of p < 0.01. The mediating role of coping strategies (CS) and SME characteristics is also significant. The goodness of fit of 0.82 indicates substantial explanatory power with a substantial predictive power of 0.59. Our findings suggest that PLS-SEM effectively prioritizes the components of SME risk. The SEM framework allows analyzing risk and vulnerability assessment by integrating data from various sectors, formats, scales, and a complex interrelationship among the determinants to help develop policies to cope with climatic hazards.