Implications of Risk Management Practices on Financial Performance of Sugar Manufacturing Firms in Kenya

Abstract

This study focuses on the implications of risk management practices on financial performance of sugar firms in Kenya. The respondents were functional heads of the companies under the survey. We used exploratory design using survey research methodology that included structuredquestionnaires and interviews. Pearson correlation coefficients (r)was used to determine the interplay of risk management practices and performance of Sugar manufacturing firms. The empirical results of the study indicated that variation in risk management practices within firms is significant, arising from ANOVA tests at 95% level of confidence. Further, the study indicates a more than average positive relationship between risk management practices and performance (r =0.67). Cronbach‟s Alpha measured at 0.82 was considered adequate for measuring internal consistency reliability of measures of concepts. The study recommends adoption of integrative risk management perspective that considers the pursuit of upside potential alongside countering of downside losses in order to minimize the negative impact of risk on returns. The implication is that risk management is an integral part of the decision-making process and effective risk management can proactively help in overcoming the possibilities of the business failures. This paper is therefore informative in terms of the imperativeness for public policy adjustment and firm-level competencies required for better operation of sugar factories in Kenya. This would translate into creating viable sugar sector to support current plans to eradicate poverty as part of the goals for vision 2030”

Keywords: Risk Management Practices; Sugar Manufacturing Firms; Financial Performance