INFLUENCE OF ENTERPRISE RISK MANAGEMENT ON ORGANIZATIONAL PERFORMANCE: EVIDENCE FROM KENYAN STATE-OWNED CORPORATIONS

Abstract

The study conceptualized the association between performance of state corporations (SCs)
in Kenya and their enterprise risk management (ERM). ERM is a practice in strategic
management that aims to manage risks within the adopted risk tolerance and offer realistic
guarantee in accomplishing an entity’s objectives and goals. This strategic management
practice was introduced in public organizations as part of the government reforms to deal
with the dismal performance of state corporations. However, following its introduction in
the year 2009 and thereafter it being made mandatory to augment other performance
related reforms in the SCs, poor performance persists in most SCs. The purpose of the
study therefore, was to determine the effect of ERM on organizational performance of SCs
in Kenya. The study used structured questionnaire to collect data in a cross-sectional
survey design approach. Data was collected from 92 state corporations in Kenya.
Descriptive and inferential statistics were used in analysis of the collected data. The results
from the study established that ERM had a statistically significant influence on
organizational performance. The results supported contingency theory of ERM. The study
stresses the need to enhance the enforcement and implementation of ERM in strategic
government agencies. The study contributed to knowledge by demonstrating that ERM
significantly influences performance in public sector organizations. The study supported
the advancement of contingency theory of ERM by validating that ERM has a positive
influence on the performance of SCs in Kenya, thus extending the advancement of the
theory to the public sector context. This suggests that matching the contingent factors and
adoption of strategic risk management in an organization enables it to accomplish the
envisioned outcomes. The study recommendation to policy is for the government to enforce
the adoption of ERM in SCs by evaluating its adoption and aud