The Effect of Risk Management Practices on Performance of Firms in the Hospitality Industry in Nairobi County, Kenya

Abstract

The project research finds out the effect of risk management practices on the financial performance of firms in the hospitality industry in Nairobi county Kenya. The objective of the study is to assess the effect of the risk management practices on the performance of firms in the hospitality industry in Kenya. This study will be significant to tourism firms, general public, students and the government as it will offer valuable contributions from both a theoretical and practical perspective. Theoretically, it will contribute to the general understanding of risk management practices and their effect on organizational performance. There are critical issues and challenges affecting Kenya's competitiveness and sustainability as tourist destination. Hospitality industry in Kenya has had difficult times over the years, particularly a prolonged period of lackluster performance in the 1990s. A post-election period of civil unrest in 2008 and the global economic crisis in 2009 only made inbound international tourism business more challenging. Then in the recent past is the threat of terrorism in which Kenya has lost both its citizens and the tourists to the Al-shabab from Somalia. The study found that risk assessment, risk response, innovation and quality had positive significant effects while internal environment and control activities had positive significant effects on the financial performance of firms in the hospitality industry in Nairobi County. Overall risk management practices accounted for almost all of the variance in financial performance of the firms. Thus, the study concludes that the risk management practices influence the financial performance of firms in the hospitality industry to a very large extent. The study recommends that firms in the hospitality industry in Kenya should employ robust risk management practices as these are likely to influence their financial performance in one way or another, improve on their financial performance, they should focus more on improving how they assess their internal environment and work on control activities as these are likely to enhance financial performance of these firms