A Survey of Foreign Exchange Risk Management Practices by Textile and Apparel Firms in Export Processing Zones in Kenya

Abstract

The aim of this research study was to identify the nature of foreign exchange risk exposure faced by apparel firms in Kenya and to ascertain the foreign exchange risk management practices employed by apparel firms in Kenya The population of the study consisted of all 23 EPZ firms that were involved in production and sale of apparel and garment in Kenya as listed in Kenya Export Processing Zone Authority Qualitative primary data was used for the study. It was collected through self-detailed administered questionnaires (see appendix II) that had been constructed using open ended, close ended and Likert type of questions The primary data collected from the questionnaire was analysed using descriptive statistics such as measures of variation and measures of central tendency. The results were presented in the form of frequency tables, charts and graphs where necessary. The data analysis method was quantitative in nature using descriptive statistics where frequency and percentages were applied. The study concludes that most firms did not have a risk department or section hence could not also be in a position to have a documented foreign currency management policy. The study also concludes that most firms had their Chief executive officers as the person responsible for the risk management department. The study also concludes that the firms had problems when it came to managing of foreign exchange risks. Such problems included getting the right foreign currency mix and frequent changes in exchange rates. The study recommends that export processing zones firms should have a risk department or section. This can be responsible for the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events.