Effects of Information Technology on Enterprise Risk Management of Listed Firms in Kenya

Abstract

As technology improves risks affecting firms also increases and they become complex. The purpose of this study was to investigate the effect of information technology on enterprise risk management of listed firms in Kenya. Enterprise management is measured by financial performance. With the advancement in technology risk management becomes complex and therefore posing an increasing number of new risks on market players. There are increasing cases of fraud through use of technology and mostly affecting financial institutions where large amounts of money is transferred from one account to another without the knowledge of the owners. An increase in business activities, complexity, unpredictability and evolving risks have triggered momentum in enterprise risk management (ERM) globally. While there is growing attention on ERM globally in recent years, disturbing statistics on increasing and evolving risk continue to affect firms. Empirical evidence shows that risks keep on increasing and evolving a manifestation of weak enterprise risk management in place. Despite the fact that most of the firms in Kenya are adopting technology to enhance service delivery, there are increasing challenges arising from the use of technology. This study sought to establish the influence of information technology on ERM. Methodology; Using a descriptive study of listed firms in Kenya, questionnaires and record survey sheets was used to collect data from the firms. All firms that had put in place ERM was sampled and questionnaire was used to collect data from the managers heading ERM departments in the listed firms. Secondary data on financial performance was collected using survey sheets. Data collected was analyzed using SPSS version 21 to calculate descriptive statistics and regression analysis models. The qualitative data was analyzed using content analysis method. The relationship between independent variables and dependent variable was analyzed using linear regression model. The findings from the study confirm that effective information technology on ERM has significant influence on financial performance of the firms. Information technology on ERM can be used to set risk management objectives, identification of risks, assessment of risks, setting measures to mitigate against risks, controlling risks and passing information about risks. On financial performance, effect can be in terms of efficiency in service delivery, quality of products and increase in earnings.