Effect of Enterprise Risk Management on Financial Performance of Selected State-Owned Enterprises in The Ministry Of Energy And Petroleum In Kenya

Abstract

The focus of this study was to assess the effect of ERM on financial performance of selected state-owned enterprises under the Ministry of Energy and Petroleum in Kenya. The study was guided by the following research objectives: to establish the ERM practices adopted by selected state-owned enterprises in the Ministry of Energy and Petroleum, to determine the extent of implementation of ERM, establish the financial performance trends and to determine the effect of ERM on financial performance of selected state-owned enterprises in the Ministry of Energy and Petroleum in Kenya. The sample size of the study was 42 senior staff from three state- owned enterprises. The study used descriptive research design and purposeful sampling. Primary data was collected using a questionnaire while secondary data was collected from the financial statements over a period of five years (2011-2015). Data was analysed using SPSS version 23. The study revealed that, risk identification and mitigation played the most significant role in influencing financial performance of SOEs. The study also established that, the SOEs focused on strategic risk management practices to a large extent while focus to liquidity, market and credit risk management practices is to a moderate extent. The study further concluded that ERM significantly contributed to financial performance of SOEs. The study recommended that the management of the state-owned enterprises in Kenya should strive to ensure that there are effective ERM systems in the organizations.