The relationship between foreign exchange risk management strategies and profitability of Mobile Telecommunication Companies in Kenya

Abstract

The increased volatility of the financial markets, has given rise to increased financial price risks faced by companies. Companies are now exposed to risks caused by unexpected movements in the exchange rates. With the growing global presence of the mobile telecommunication industry, thee companies in these industry are exposed to a wide range of financial risks, in particular foreign exchange risks and interest rate risk. Management of these risks has become key to the success and survival of companies in today’s volatile financial markets. This study has taken a keen look at the foreign exchange risk management and its impact of the profitability of mobile telecommunication companies in Kenya The research design adopted in this study was a census survey. The population consisted of all the four mobile telecommunication companies operating in Kenya licensed by CCK. Primary data collection, through use of a questionnaire was used to gather information from the target population outlining the relevant issues of the study. Analysis was then done using SPSS program. The analysis sought to generate descriptive statistics and relationship. Finally the presentation of the results was done by use of tables. The results of the study showed that there exist a positive relationship between foreign exchange management strategies and profitability of mobile telecommunication companies. It was also found out that most of the companies had established a risk management function In light of the above findings, it’s imperative that mobile telecommunication companies use foreign exchange management practices in order to put foreign exchange exposure under control to increase their profitably and survival in the competitive economy. Academicians can do use the findings of this study and compare them to other empirical studies in order to gauge the level of use of foreign exchange management strategies by mobile telecommunication companies in Kenya their impact on profitability.