Effect of Risk Management Practices on Financial Performance in Kenya Commercial Banks

Abstract

The purpose of this study was to investigate the effect of risk management practices on Commercial Banks performance. Mixed method of research design was used and data was collected using questionnaires and interview schedules.  Target population was 43 licensed Commercial Banks in Kenya from which one hundred and thirty three (133) managers were randomly selected to form sample size. Cronbach test of 0.874 was obtained and validity of the research instruments was ensured through content, criterion and construct validity testing. Data was analyzed using descriptive statistics and inferential statistics which included correlation analysis, bivariate regression analysis and multiple regression analysis. The study established a positive statistically significant relationship between risk management practices and financial performance. The risk management practices explained 62.2% of the changes in the financial performance in commercial banks in Kenya. It’s recommended that, risk management framework should be adopted in financial institutions to enable them proactively mitigate risks.

Keywords: Risk management practices, financial performance, Commercial Banks