The Effects of Adoption of Risk Management Initiatives on Organizational Performance in The Energy Sector in Kenya: A Case of Kengen

Abstract

This study sought to find out whether organizations in Kenya could perform more effectively, realize more profits and gain competitive advantage through the adoption of risk management practices. Risk management is a relatively new concept in Kenya unlike in developed countries where it is a discipline at the core of every large organization. The objectives of this study included investigating how KenGen identified possible future events or changes that could adversely affect its operations, establishing the effect of compliance to policies and procedures in relation to operational efficiency at KenGen, and establishing the significant factors which affect ERM implementation. The study used causal research design where primary data was gathered using questionnaires and interviews. Secondary data was collected from the Nairobi Securities Exchange (NSE) and KenGen management reports. The study found that KenGen was exposed to a large number of risks, including political risk, hydrology risk, liquidity risk, financial risk and fraud risk, and that the majority of the respondents were aware that KenGen had a risk management policy but only 70% of them had read it. Also, internal controls were important in reducing the likelihood of certain events occurring. The study concluded that that risk management practices were widely used at KenGen and that the organization had a documented risk management policy. Secondly, managers at KenGen had not quite identified all significant risks facing the firm and that the risk department had not fully developed methods for managing risks. The study recommends that, KenGen should conduct an annual risk assessment and report results to the Audit Committee, develop an audit plan that incorporates the results of the annual risk assessment and scheduling audits for the year that focus on the organizations high risk areas.