THE EFFECT OF ENTERPRISE RISK MANAGEMENT AND MACRO ENVIRONMENT ON THE PERFORMANCE OF KENYAN STATEOWNED CORPORATIONS

Abstract

Enterprise risk management (ERM) has grown in importance within the context of both
non-financial and financial organizations, undoubtedly with the reason that the business
macro environment is rapidly changing and constantly becoming complex. The dynamism
and complexity of the external environment have led to the demise of various organizations
even with robust enterprise risk management systems. This study conceptualized the effect
of ERM and macro environment on organizational performance. The theoretical
conceptualization was anchored contingency theory of ERM, open systems theory and
Stakeholders theory. The study focussed on state corporations (SCs) in Kenya and purposed
to answer the question as to whether ERM and macro environment influenced the
performance Kenya state owned corporations. The study population was 187 Kenya state
owned enterprises geographically located in various parts of Kenya. Cross sectional survey
design was applied in the study and structured questionnaire used to gathered data. The
study used descriptive and inferential statistics to analyse the collected data. The study
hypotheses were tested using Baron and Kenny model. The study findings established that
ERM had a significant influence on the performance of SCs in Kenya. However, the
findings revealed that macro environment had no significant moderate influence on the
relationship between ERM and performance of SCs in Kenya, thereby failing to support the
advancement of Open systems theory. The study contributed to knowledge by
demonstrating that ERM has a positive influence on organizational performance. This
position validated and advanced the proposition of the Contingency theory of ERM. The
study made policy recommendations on further enforcement of ERM adoption in SCs,
practicing managers to institutionalize strategic risk management and lastly, for
stakeholders theory, to consider giving prominence to stakeholder risk assessment by the
organization. The study was encountered a few limitation and recommends further studies
to consider the study variable while adopting different research design.