Effect Of Enterprise Risk Management On Financial Performance Of Supermarkets In Nairobi County

Abstract

Enterprise risk management (ERM) is an increasingly popular strategy that attempts to holistically evaluate and manage all of the risks faced by the firm. A combination of factors including gross mismanagement, poor strategic decisions, tax issues and massive internal losses perpetrated by some wayward employees and suppliers are the main reasons behind the turmoil’s and slow death of giant retail chain stores in Kenya. Retail firms make money and increase stakeholder value by engaging in inventory activities which harbor many risks. However failure to identify, assess, and manage the major risks facing these organization’s business model results in significant loss of stakeholder value. This study therefore sought to fill the research gap by assessing the effect of ERM on financial performance of supermarkets in Nairobi County. The specific objectives of the study was to establish the effect of risk identification, risk monitoring, risk response and risk mapping on financial performance of supermarkets in Nairobi County. The study applied a descriptive research design. The target population of this study comprised 10 major supermarkets that include Tuskys, Naivas, QuickMart, Cleanshelf, Tumaini, Ukwala, Chandarana, Eastmatt, Shoprite and Carrefour. The target size of the population is 80 top, middle and supervisors working in these sections in the supermarkets in Nairobi County. The findings indicated that risk identification and financial performance of supermarkets in Nairobi County, Kenya is positively and significantly related (β=0.143, p=0.001). Risk monitoring and performance of financial performance of supermarkets in Nairobi County, Kenya are positively and significantly related (β= 0.251, p=0.000). Risk response and financial performance of supermarkets in Nairobi County, Kenya are positively and significantly related (β= 0.132, p=0.030). Risk Mapping and financial performance of supermarkets in Nairobi County, Kenya were positive and significant (β =0.150, p=0.005). The study rejected the hypothesis on risk identification, risk monitoring, risk response and risk mapping on the performance of supermarket. The study concluded that risk identification, risk monitoring, risk response and risk mapping were key enterprise risks that largely affected the performance of supermarket. The study recommends that supermarkets should institute and nurture good enterprise risk management programmes. The programmes should encompass the design and institutionalization of appropriate risk management structures to effectively provide direction and oversight over the management of risks that affect such supermarkets. Enterprise risk management frameworks and policies should be defined and communicated across the supermarkets to widen the ownership and enhance responsibility and accountability for all staff in the management of risks within the supermarkets. A sustained campaign to improve on risk culture should be introduced in supermarkets coupled with regular risk management practices of risk identification, risk monitoring, risk response and risk mapping. The campaign should encourage communication of risks in an open, timely, and transparent manner and provide all key stakeholders with the relevant information that informs the decisions and norms of the supermarkets.