Relationship Between Enterprise Risk Management Practices and the Financial Performance Among Commercial State Corporations in Kenya

Abstract

This study sought to establish the relationship between ERM practices and Financial Performance among Commercial State Corporations in Kenya. Specifically, the study aimed at establishing the influence of Operational risk management practices, Strategic risk management practices, Financial risk management practices and Governance risk management practices on the Financial Performance of Commercial State Corporations in Kenya.The underpinning theories of the study included; the Modern Portfolio Theory, Modigliani and Miller Proposition and the Capital Assets Pricing Model (CAPM) The study used a descriptive research design and the target population comprised of all the 55 Commercial SC in Kenya. Quantitative and qualitative data was collected using a semistructured questionnaire. Quantitative data was collected for a period of 5 years from 2010-2014 and analyzed using descriptive statistics and factor analysis while qualitative data was analyzed using content analysis. The results of the study indicated that Operational, Strategic, Financial risk and Governance risk Management Practices had positive effects on the Financial Performance of Commercial SCs to an extent of 70%, 71%, 66% and 72% respectively. The study concludes that Enterprise Risk Management Practices influence the Financial Performance of Commercial SCs in Kenya to a very large extent. The study recommends that all the Commercial SCs in Kenya employ robust Enterprise Risk Management practices, fully implement their ERM frameworks and on a frequent basis evaluate the Enterprise Risk Management Practices and the Government to encourage more firms to institute ERM practices as well as create more awareness on the need for the same in all organisations.