Project Risk Management Practices, Government Regulations and Organizational Performance: A Case Study of Geothermal Development Company in Kenya

Abstract

The energy sector plays a central role in Kenya’s socio-economic development, yet organizations such as the Geothermal Development Company (GDC) continued to face challenges arising from ineffective project risk management. Idle rigs, unutilized wells, strained community relations, and operational inefficiencies heightened project risks, undermining organizational performance and slowing the delivery of affordable and reliable energy. Against this backdrop, this study examined the effect of project risk management practices specifically risk identification, risk assessment, and risk mitigation on organizational performance at GDC, while also investigating the moderating effect of government regulations. The study focused on geothermal drilling projects in Kenya between 2022 and 2024, a period marked by dynamic regulatory reforms and evolving risk environments. The target population comprised 400 employees drawn from strategic departments directly engaged in project execution, risk oversight, and organizational performance monitoring, including Drilling & Infrastructure, Geothermal Resource Management, Geothermal Resource Assessment, Finance, Strategy & Planning, Legal Affairs, Supply Chain Management, and Quality Management Systems & Risk Management Coordination. A stratified proportionate sampling technique was employed to ensure representation across the departments, yielding a sample of 200 respondents determined using Yamane’s formula. Data was collected using structured questionnaires. To ensure reliability and validity, research instruments underwent pretesting with 20 respondents from KenGen PLC, with Cronbach’s Alpha (α ≥ 0.70) used to test internal consistency, and refinements were made where necessary. Quantitative data was analyzed using SPSS version 30, employing descriptive statistics, correlation, and regression analysis to test the relationships among the variables. The study’s findings provided empirical evidence on how risk management practices affected organizational performance in Kenya’s geothermal sector, offering insights that can guide GDC and other energy institutions in strengthening resilience, improving efficiency, and enhancing stakeholder satisfaction. The study established that project risk management practices including risk identification, risk assessment, and risk mitigation positively and significantly influence organizational performance at GDC, with risk assessment emerging as the strongest predictor. The joint analysis indicated that an integrated approach to these practices enhances operational efficiency, project completion, and stakeholder satisfaction (R² = 0.674, p < 0.001). Furthermore, government regulatory policies were found to significantly moderate this relationship (β_interaction = 0.183, t = 3.735, p < 0.001), demonstrating that alignment with regulatory frameworks strengthens the effectiveness of risk management strategies. The findings recommend and underscore the importance of institutionalizing structured risk practices in GDC, adopting advanced assessment techniques, integrating mitigation plans, and ensuring regulatory compliance to optimize organizational performance. Further research should examine the role of organizational culture, leadership and digital risk monitoring tools as well as conduct comparative or longitudinal studies across Kenya’s energy sector to deepen understanding of sustainable risk management practices.