Risk management strategies and their effect on the financial performance of public benefit organizations In Kisumu County Kenya

Abstract

Many Public Benefit Organizations have emerged in Kisumu County, Kenya with an aim of offering solutions to the many problems being faced by the residents. The PBOs attract huge restricted funding from donors, both local and international to meet their objectives and sustain the operations. The PBOs are however managed with minimal regulations and oversights which expose them to diverse risks which may have negative effects to the many stakeholders in the industry. With the huge funding levels and weak county government monitoring of PBOs, the need was felt to carry out a research to find out if PBOs have systems to identify and prioritize risks, what strategies they have instituted to manage risks and how risk management has impacted on their financial performance. This study therefore aimed to achieve two objectives; to identify strategies that PBOs in Kisumu County use to manage risk and to determine the relationship between risk management strategies and financial performance of PBOs in Kisumu County. This study employed multiple regressions to analyze the effect. The data collection involved the use of both quantitative and qualitative research methodology. I collected Primary data using a questionnaire to prompt information about risk management strategies of PBOs in Kisumu County. I successfully obtained data from 126 PBOs. The Target respondents were the Finance/Grants Officers and the Accountants of the target PBOs. Data was analyzed and presented in form of pie charts, descriptive tables and histograms. The data was analyzed using the Statistical Package for Social Scientist (SPSS). Before running the regression, data testing was conducted. To obtain a good-fit estimation, some tests were carried out to ensure statistical assumptions, such as linearity of variables, no correlation among independent variables, and no omitted variable problem. Multiple correlation coefficient was then calculated to determine the relationship between risk management strategies and financial performance of PBOs in Kisumu County. The findings indicated that a minimal relationship exists between risk mitigation strategies and performance of public benefit organizations indicating that risk mitigation strategies affect performance of the PBOs but at minimal levels. Recommendations were made that PBOs in Kisumu County should consider cost management and revenue management strategies and also improve on their efficiency so as to ensure that most funds are utilized to benefit the targeted populations rather and reduce the percentage of revenue used to pay administration expenses.