Role Of Risk Management Strategies on Growth of Small and Medium Enterprise in Information Communication and Technology Sector in Nairobi, Kenya

Abstract

Risks are experienced by both small and large business, and these have increasingly brought to the fore risk management practices in business. Risk management strategies have been adopted by SMEs, with the strategies playing different roles to SMEs. The relationship between risk management and performance of SMEs has been explored in other studies with studies focusing on the financial performance of SMEs. However, the question on the role of risk management strategy on the growth of SMEs has yet to receive predominant attention. Thus the study was carried out with an aim to determine the role of risk management strategies on the growth of SMEs in ICT sector in Kenya. Specifically the study focused on analysing the role of insurance, internal audit and network relationship on the growth of SMEs in Kenya. To achieve this, the study adopted a descriptive research design. The population of the study was the Top 100 mid-size companies in 2013 and 2014. A sample of 14 companies was selected for the study, and with a total of 4 interviews per SMEs bringing total sample size to 56. Data was collected through questionnaire with the data analyzed through SPSS. The significance of the risk management practices on growth of SMEs was analyzed using the regression analysis and correlation analysis. Test of significance included coefficient of correlation (R) and coefficient of determination (R-squared). The results of the study are presented through frequencies, percentages, tables, cross tables and regression tables. The results of the study indicated that there exists a significant relationship between internal audit and growth of SMEs. On the other hand the study revealed that there exists no significant relationship between insurance policy uptake and growth of SMEs. The findings of the study confirmed that risk management strategies affect growth of SMEs, albeit with a small effect as indicated with an R2 value of 34%. These findings conclude that risk avoidance and risk prevention has an impact on the growth of ICT SMEs. The study recommends that SMEs should adopt risk management practices after carrying out risk analysis on their business.