RISK CULTURE ASSESSMENT OF SMES THROUGH CAUSAL RELATIONSHIPS Case Study: SMEs in Southern Region Miranda Pajo Mathematics Dept. Vlora City, 9400 pajo.miranda@gmail.com Elmira Kushta Mathematics Dept. Vlora City, 9400 kushtamira@gmail.com Miftar Ramosaçaj Mathematics Dept. Vlora City, 9400 miftar.ramosaco@gmail.com Abstract Constant identification and assessment of the risk culture of SMEs is one of the most important challenges for the management staff of these organizations. The factors that enable the identification of risk culture are generally not numerically measurable in most usual cases, and this leads in complications of its immediate and direct identification. In the vast majority of cases these factors are measured through perceived sensitivity of the organization members. As a result, the process of decision making, and generally of the organization of the main activities becomes possible through cause and effect analyses. The main purpose of this research is to study the causal relationships through statistical methods of the most important influent factors in the risk culture identification and assessment, and their representation by means of graphs and diagrams. This paper represents the study of causal relationships of some of the most important factors considered in the Albanian reality, in order to identify the risk culture of SMEs in the Southern Region. 1. Introduction Risk culture is a term describing the values, beliefs, knowledge, attitudes and understanding about risk shared by a group of people with a common purpose, in particular the employees of an organization. One element of risk culture is a common understanding of an organization and its business purpose. Employees must also understand that risk and compliance rules apply to everyone as they work towards business goals. This understanding can ensure a company “does the right thing” and is a fundamental part of good ERM practices. In order for there to be a strong risk culture, employees need training to understand how to make educated risk-related decisions to ensure consistent risk behavior in an organization. Risk Culture is one among many risk types with which the bussines is faced nowadays. Risk Culture is a widely used term recently in albanian SME’s environment. Albanian SME’s have little knowledge about this risk. Organization’s risk culture refers to behavioural principles of individuals and groups within the organization, which determine the ability to identify and assess, and the posibility to operate in terms of actual and future risk. Risk Culture is a term that describes the values, beliefs, knowledge and understanding about the risk from employees of an organization, or groups within the organization. Cultural risk is closely related as a concept to the culture of the organization. The organizational culture represents the way of life in the organization, its style or “personality”. Culture generally is stable, which means after it is established, it is not easy to change. This paper is based on the argument that the relations between the measurable properties, that whether or not have effect on a certain phenomenon include (i) the statistical links and (ii) the mathematical connections. Statistical links are correlative connections between the explanatory variables. While mathematical ties are mathematical equations that express relationships between explanatory variables and the dependent variable using a base of appropriate data. The purpose of analyzing the correlation connections, using bivariate correlations between the explanatory variables, is to establish strong relations and significative between explanatory variables simultaneously, and identify strong correlations which bear the risk of multicollinearity. In this paper, this is accomplished by studying the general table of correlation and partial correlation table between explanatory variables that carry the risk of multicollinearity. Mathematical relationships have aims to identify the degree of influence of the explanatory variables on the