Enterprise risk management practices and organizational performance. Does intellectual capital make a difference?

Abstract

Enterprise risks pose threats to the capability of an organization to accomplish business processes and create value. This research sought to add to studies done in the area of enterprise risk management (ERM) by focusing on the moderating effect of intellectual capital on the relationship between ERM governance practices and organizational performance of state corporations in Kenya. This study was guided by resource based theory. The study used explanatory cross sectional survey design. Primary data on ERM practices, intellectual capital and organizational performance was collected from structured questionnaires. A survey was carried out on 218 state corporations in Kenya. Data collected was analyzed by use of descriptive and inferential statistics. The research hypotheses were tested using multiple regression analysis. ERM governance practices were also found to significantly (β=0.412, p<0.05) influence organizational performance. Furthermore, the study found that intellectual capital had an enhancing and significant moderation effect on the relationship between ERM governance practices (β =.658, ρ< .05) and organizational performance. This study contributes to the body of knowledge by positioning intellectual capital on the empirical testing of resource based theory as well as the impact of intellectual assets on the relationship between risk governance practices and organizational performance. Further, the study recommends that SCs need to define and document strategies for managing risks, in addition to ensuring that sufficient resources are availed towards the attainment of risk management.