Relationship Between Corporate Governance and Risk Management Practices in Government Owned Institutions of Kenya

Abstract

The world today is much closer than any other time in the history of mankind. This has been due to advances made in technology especially in the areas like transport, communication, financial transaction among other sectors. The concept of global economy is now more of a reality than a mirage. The study sought to establish the relationship between corporate governance and risk management in the context of government owned entities (parastatals). This study adopted the descriptive/diagnostic research design where the researcher was required to define clearly what he wants to measure and must find adequate methods for measuring it along with clear cut definition of the population he wants to study. On this study, due to the heterogeneous nature of the universe (i.e. Kenyan parastatals), constraints of time and availability of finance a random sample of 40 corporation (i.e. 30% of the universe), was considered. In this study the research was based on collection of primary data using a descriptive research method to establish the relationship that exist between the variables. A linear-multiple regression problem was formed that linked the dependent variable to independent variables. The study concludes that there is in place a formal and transparent process for board appointments based on merit and that the board meets at least quarterly, there is in place a formal induction program for new board members. The study concludes that the board ensures that a policy on the management of conflict of interests is in place and adhered to. The study concludes that the board ensures an effective and efficient system of internal control is in place in the organization. The study concludes that the board has established an independent audit committee which is responsible for overseeing the internal audit function and the external auditor. The study recommends that in order to guarantee success in the implementation of strategic plan, corporate must to have strong top leadership. Board members should be qualified for their positions, have a clear understanding of their role in corporate governance and corporates management should identify the underlying issue that’s cause the financial difficulties, track the expenses and build a budget that works for the organization, it is also important to set clear priorities first.