Effect of Enterprise Financial Risk Management on Performance in Kenya Commercial Bank, Western Region.

Abstract

The recent financial crisis that hit the entire world raised several questions with respect to the growing awareness and the need for appropriate Enterprise Financial Risk Management (EFRM) in financial institutions. It calls for through assessments of the structure and components of the EFRM frameworks and practices of banks by regulators, analysts and financial watchers from time to time, to ascertain the adequacy of the systems, policies and procedures of managing financial risks as well as their conformity to current best practices. It is assumed that banks fell into problems because they took much financial risk. Therefore, there is more pressure for regulations towards EFRM at banks. However, there is no clear consensus about whether the implementation of more EFRM leads to better performance. In other words, it is not proven that more EFRM is effective in helping banks survive a financial crisis. As contribution to this exercise, the general objective of this study sought to find out effect of Enterprise Financial Risk Management on performance in Kenya Commercial Bank. The specific objectives of the study was to determine how financial leverage affects performance in Kenya Commercial Bank, to determine how diversification of products affects performance in Kenya Commercial Bank and to determine how credit policy affects performance in Kenya Commercial Bank. The data of the study was collected from various sources, both primary and secondary. Primary data was collected from 30 branches of KCB; Western Region using stratified random sampling.The sample size was 244 employees.The reason behind the choice of stratified random sampling is that employees in KCB are categorized into three strata which are ; top management, middle management and lower management. Secondary data was collected from journal articles, memos, various reports and the organization website. Data was collected by use of questionnaires and analyzed in form of descriptive and inferential statistics. Descriptive was by use of tables. Inferential was by use of Pearson correlation and regression analysis concerning relationship between the variables. Statistical Packages for Social Sciences (SPSS) soft ware was used to analyze the data. Findings revealed statistically, significant positive relationship between EFRM and performance in KCB, Western Region (0.749; p= 0.05).This study was to benefit both the internal customers (employees) and external customers by improving in their performance and increasing knowledge respectively