The Effect of Enterprise Risk Management on the Strategic Performance of I&m Bank Limited, Kenya

Abstract

Risk events are a regular occurrence in any form of business, with the extent of risks faced differing only by the nature of business carried out. The financial sector handles a large amount of funds on behalf of clients, making the argument for it being prone to higher risk viable. Risk management forms an important aspect of controlling the likelihood and impact of negative events. If risk management is indeed the effect of uncertainty on objectives, then there is need to consider risk management and strategy in conjunction. In what way does risk management affect strategy and strategic performance? To answer this question, this study investigated the effect of enterprise risk management on the strategic performance of I&M Bank Limited, Kenya. The researcher opted to use a case study, such that the study unit was a single firm. The data collection technique sought to obtain detailed qualitative data, thereby, the researcher used an interview guide with both open-ended and closed-ended questions. The study targeted 30 employees at assistant manager or manager positions at I&M Bank Limited. To analyze the information obtained, content analysis approach was used, which enabled the data to be presented in continuous prose format allowing detailed explanation of the outcome of the responses from the interviews. To recognize the level of enterprise risk management within the bank, the researcher made use of a number of risk factors such as: depth of risk management in an organization, risk awareness and participation, risk appetite, risk assessment and the organizational “risk” structure which includes an element of communication. The study established that risk management techniques, communication and culture is ingrained within the bank such that employees are able to identify its various aspects and quantify its majorly positive effect on their performance. Since risk activities form part of the strategy activities, the two are shown to be inter-linked to achieve the desired performance. To enforce this conclusion further, the balance sheet size and profit figures show a year-on-year growth that has been sustained over the years. Employees were also seen to have a positive attitude towards risk management and what it sets out to achieve: sustainable strategic performance. The main recommendations of this study included continued enforcement of risk management and associated processes as well as achievement of a balance between risk control procedures and the inflexibilities and bureaucracy that may set in while enforcing them. The study also recommended the uptake of technology to improve the quality and efficiency of strategy and risk processes within the bank and industry-wide.