Risk Management Techniques on Financial Performance of State-Owned Sugar Companies in Kenya

Abstract

Financial performance of sugar companies in Kenya is generally poor and has been fluctuating over a long period. The state-owned sugar companies are worse compared to the privately owned companies. The sugar sector has been orbiting around sugar scarcity, inefficiencies, failure to pay farmers, failure to renovate and modernize production unit, failure to battle with imported sugar, recurrent losses and political interference. The main objective of this study was to evaluate the effect of risk management techniques on financial performance of state-owned sugar companies in Kenya. The specific objectives guiding the study were; to establish the effect of risk avoidance on financial performance of state-owned sugar companies in Kenya, and to assess the effect of risk acceptance on financial performance of state-owned sugar companies in Kenya. The study was anchored on the risk management theory, model risk management and the theory of financial control. The study adopted a descriptive research design with a target population of fifty four respondents being employees from the six state-owned sugar companies in Kenya. Questionnaires were the main data collection tool. Data was analyzed with the help of statistical package for social science version 28, Analysis of Variances, Correlation and regression analysis tools were used to establish the relationship between the variables. The findings of the study revealed a statistically significant regression effect and indicative of accomplished prediction of financial performance of state-owned sugar factories through the F-calculated value which showed that the model was significant. Risk avoidance explained 53.9% of financial performance and risk acceptance explained 61.9% of financial performance of state-owned sugar factories in western Kenya. The findings of the study will provide an insight to finance practitioners on the risk management techniques and their relationship with organizational financial performance as well as contributing to the scholarly literature on risk management techniques in other sectors of the economy. Keywords: Risk, Risk Avoidance, Risk Acceptance, Financial Performance, Risk management Techniques