Effect of Risk Management Strategies on Financial Performance of Commercial and Services Firms Listed at Nairobi Security Exchange

Abstract

Due to liberalization, globalization and the rapid and advancement growth in technology new business opportunities have been created and most of the industries are becoming highly exposed to risks as compared to the past. The firms that embed sound risk management strategies into their performance management strategies are having higher chances for achievement of operational and strategic objectives. Consequently, the study assessed the effect of strategies with respect to risk management on the success of the banks which are under the NSE. The presented conceptual framework which was guided by these theories: Capital asset pricing model theory, enterprise risk management theory and contingency theory. Quantitative research approach was applied using primary data for the sample period covered from 2016 to 2020. Analysis of the collected data was done through panel random effect of regression model. The results from the study indicated that assessment of risk as well as monitoring and evaluation have positive significant effect on the output on banks within NSE. Whereas identification of risk has negative effects on the productivity of these listed industries. The inquiry supports that management should emphasize on risk reviews and monitoring of internal controls to enhance risk-monitoring strategy. In addition, strict adherence to risk policies and standard should be ensured to enhance financial performance of commercial and service firms.