# Executive Summary

Small and Medium Enterprises (SMEs) play a pivotal role in the economy of many countries, particularly in developing economies. Indeed, in emerging economies, they contribute up to 60 percent of employment and up to 40 percent of gross domestic product (GDP). As such, there is a wide array of programs focused on improving the capacities of SMEs. These programs typically focus on improving skills, as well as in providing financial support for infrastructure and management with the objective of integrating SMEs into global markets. Nonetheless, these programs often overlook an important aspect that tends to influence firm performance: _the mental health status of entrepreneurs_ who lead these companies and the attendant consequences on their business performance. Findings from the literature of small business economics and cognitive psychology suggest that SME entrepreneurs tend to suffer from high levels of stress. Literature on small business development in Fragile, Conflict and Violent (FCV) areas reveals that entrepreneurs face far more uncertainty and risk in such environments than in a typical developing country context — with the psychological price being even higher.

The first objective of this review is to collect and synthesize some of the evidence between stress and SME performance in FCV environments. The second objective is to identify promising, scalable psychosocial support interventions, based on cognitive‐behavioral approaches, that can be adapted and implemented to improve the mental health status of SME entrepreneurs in such high stress environments.

The prevalence of chronic levels of stress and anxiety among entrepreneurs has been widely documented in the literature. This is particularly the case for SME entrepreneurs who possess less diversified physical, financial, psychological and intellectual resources, and whose only asset is the firm (Ang 1991). In addition, SMEs are often family‐run businesses, and entrepreneurs often take on multiple responsibilities, working long hours, not disengaging from work and not delegating responsibilities. This results in continuous cognitive engagement and stress for the entrepreneurs managing these firms. Whereas low to moderate levels of stress can be a positive trigger for the performance of entrepreneurs, chronic stress could potentially be harmful for both well‐being and performance in the long run. Chronic stress can deplete the psychological resources of entrepreneurs. Specifically, it can erode their influencing and motivating role, and result in counterproductive work behavior, thereby negatively impacting firm performance.

The factors, called stressors, that contribute to stress in entrepreneurs can be wide‐ranging, including direct business activities, professional and personal relationships, career prospects, organizational roles, non‐work factors, and the external environment (Cartwright and Cooper 1997; Quick and Quick 1984; and Schuler 1982). In FCV countries, the combination of the regular, business‐driven entrepreneurial stressors with the FCV‐specific external environment uncertainties — including factors such as natural disasters, conflict, migration, and/or exposure to trauma — can amplify poorer psychological outcomes and hamper business performance. In a rapid needs assessment study from the Khyber Pakhtunkhwa/Federally‐Administered Tribal 4