Enterprise Risk Management: A Comparative Study of Small and Medium Manufacturing Industries in Nakuru Municipality, Kenya

Abstract

Micro and Small Enterprises account for 75 per cent of total the employment and 30per cent of the Kenya‟s gross domestic product as of the year 2008. However, two thirds of micro and small enterprises fail within the first few months of operation. Further, small and micro manufacturing industries due to their size are more vulnerable to business uncertainties compared to medium and large industries. The objectives of this study were to compare the enterprise risks, and risk management practices between micro and small and medium and large manufacturing industries in Nakuru Municipality. A combination of descriptive and comparative study designs was used. The target population for the study was 1937 comprising of 1847 micro and small industries and 90 medium and large industries, from which a sample of 95micro and small industries and 48 medium and large industries were selected through stratified random sampling. Data was collected using a questionnaire and analyzed using both descriptive statistics such as mean, mode, frequency counts and percentages. Statistical inferences were made using Pearson correlation and t-test statistics. The found out that: the most common risks in medium and large manufacturing enterprises were theft, personal injuries, property damages and critical machine breakdowns while in micro and small industries common risks were property damages, theft and natural calamities. There was a significant difference in the level of risks facing small and large industries on risks stemming from the business internal environment. Risks from external environment were indifferent between the Micro and Small and medium and large enterprises on external risks. Large industries put in risk mitigation measures to an average of 7 risk factors while small industries put measures against an average of 2 risks out of the 14 risks studied. The study concluded that risk management affected overall industry performance, profitability,growth rate and productivity. Therefore the study recommends more comprehensive risk management framework for micro and small industries workable in their ownsmall size as a strategy to reduce mortality and enhance transition from small to large.