| dc.description.abstract | This paper investigates foreign exchange rate risk management practices among Kenyan firms in the energy sector. The study focuses on how Kenyan energy sector firms manage their foreign exchange risk and the challenges they face in managing exchange rate exposure. It also seeks to ascertain the extent to which these firms use foreign exchange rate risk management techniques.
The results indicate that most of the firms in the energy sector in Kenya do have formal documented foreign exchange rate risk management systems which are also embedded in the overall company strategic plans. However, the firms exhibited a low level use of hedging techniques. For firms which use hedging techniques, forwards and currency swaps are the most used instruments, and transaction exposure is the most managed exchange rate risk. Translation and economic exposure are not well identified and managed mainly because firms believe it is unnecessary or rather too complex. Further, firms hedge their exposure but not fully due to high cost of hedging.
The main value of this study is the analysis of foreign exchange exposure management from a Kenyan perspective. Relevant recommendations aimed at enhancing the foreign exchange rate risk management practices among Kenyan energy sector firms are made. The study is useful not only to the policy makers, entrepreneurs in the energy sector and academicians, but also to financial institutions interested in providing hedging products to these firms.
The study used the survey research design. Norman and Fraenkel, (2001) define a descriptive survey as an attempt to collect data from members of a population in order to determine the current status of that population with respect to one or more variables. Phil (1996) says that descriptive research studies are designed to obtain information concerning the current situation and other phenomena and wherever possible to draw valid conclusion from the facts discussed. This is a survey research to explore the existing status of two or more variables at a given point in time. For this research, the researcher prefers to carry out survey on the practices of risk management and its challenges in the selected Kenyan corporations in the energy sector for the years 2000 through 2010. , | en_US |
