Numbers Misunderstood, Risks Unmanaged: Exploring the Consequences of Poor Financial Metric Understanding on Risk Strategies

Abstract

This study examines how financial metric literacy—encompassing profitability, liquidity, and solvency—impacts risk management effectiveness in Zambia’s financial sector. Using a mixed-methods approach (quantitative surveys, N = 75; qualitative thematic analysis), the research identifies gaps in financial literacy and their consequences for organizational resilience. Grounded in economic and behavioral theories, findings reveal significant correlations: liquidity literacy showed the strongest link to overall financial literacy (r = 0.479, p < 0.01), while financial literacy explained 35.6% of risk strategy efficacy (R² = 0.356, p < 0.001). Qualitative themes highlighted barriers such as inconsistent training, cognitive biases, and overreliance on fintech tools. The study contributes empirical insights to under-researched African contexts, advocating for standardized training and regulatory reforms to strengthen financial decision-making. Limitations include the cross-sectional design and Zambia-specific sample, urging future research to explore longitudinal and cross-country dynamics. These findings underscore the role of targeted financial education in mitigating risks and enhancing stability in volatile economies. Keywords: Financial literacy, risk management, profitability, liquidity, solvency, emerging markets.