Effect of strategic risk on organizational performance amongst quoted manufacturing and allied companies in Kenya

Abstract

The study sought to investigate the effect of strategic risks on organizational performance of amongst quoted manufacturing and allied companies in Kenya. The research was based on three specific objectives: to establish the effect of competition risk, regulatory requirements, economic risk on organizational performance of amongst quoted manufacturing and allied companies in Kenya. The study was guided by protection motivation theory and habitual action theory as the theoretical reviews of the study. The research adopted descriptive survey research design. The target population was the manufacturing and allied companies quoted at the Nairobi Securities Exchange (NSE) where there were 9 companies in this category. The study also targeted 90 strategic risk management and management team as the respondents from the three levels of management that is top, middle and lower management as unit of observation. A census of the 104 respondents was carried out of a target of 109. 5 respondents were used for pilot study. The census technique was more appropriate because strategic risk staff and management team were relatively few and therefore, it was possible to include all of them in the study. Data was collected using structured questionnaires. The data was then analyzed using descriptive statistics and linear regression analysis were used to show the relationship between independent variable and dependent variable. Data was presented in form of frequency tables, figures, percentage, and description forms. The study found that the regression coefficient for competition risk was positive implying that competition risk increased the organizational performance amongst quoted manufacturing and allied companies in Kenya. The coefficient had a p-value of 0.002 which was less than 0.05 leading to the rejection of the null hypothesis. The regression coefficient for regulatory requirements was found to be positive. This implied that the more regulatory requirements the higher the organizational performance amongst quoted manufacturing and allied companies in Kenya. The coefficient had a p-value of 0.001 which was less than 0.05. Thus, the null hypothesis was rejected. In the case of economic risk, the regression coefficient was also positive implying that organizational performance amongst quoted manufacturing and allied companies in Kenya improved by putting economic risk strategies. The coefficient had a p-value of 0.001 which was less than 0.05 leading to the rejection of the null hypothesis. Thus, economic risk had a significant effect on organizational performance amongst quoted manufacturing and allied companies in Kenya. The conclusion was that competition risk, regulatory requirements, economic risk had a significant effect on organizational performance amongst quoted manufacturing and allied companies in Kenya. Overall, the study recommends that organizations should remain agile and responsive to strategic risk through continuous scenario analysis of strategic risk. On competition risk, the study recommends that companies need to innovate products and services which will compete favorably with other companies’ products and capture a larger market. Based on the importance of regulatory framework, it is necessary for manufacturing and allied organizations to develop systems for tracking emergence and compliance to regulatory requirements to enhance organizational performance. There is also need for managers in the manufacturing and allied institutions to pay adequate attention to the economic risk by continuous analysis of costs to ensure the organizational performance is within set standards.