Abstract:
The objective of the study is to examine the effect of risk management on firm financial
performance among banks in Kenya. The study was guided by balance scorecard
model. The study took a positivism position which maintains that observation and
reason are the best means of understanding events. The study made use of an
explanatory research design. The study used this approach to explain and identify the
cause-and-effect relationship between risk management and firm financial
performance. The target population for this study was 42 banks in Kenya and 35 banks
were surveyed after the inclusion exclusion criteria. Secondary data from annual
audited financial reports for the sampled banks for the periods 2013 to 2019 were used
to meet the objectives of the study and Data collection schedule was used to extract
data from bank annual reports. The data was analyzed using both descriptive and
inferential statistics. The risk management regression results revealed a positive and
significant effect on firm financial performance (= 40.18176, p= 0.000). This means
that increasing risk management strategies by one unit improved bank financial
performance by 40.18176 units. The practical implications of the positive and
significant effect of risk management strategies on firm financial performance
emphasize the importance of prioritizing risk management practices within banks. By
adopting robust risk management frameworks, banks can enhance their financial
stability, competitive advantage, regulatory compliance, strategic decision-making,
investor confidence, and overall performance in the market. Continuous improvement
in risk management practices is essential to adapt to evolving risks and maximize long-
term financial success. Therefore, enhancing risk management practices can positively
impact the overall financial health and success of the organization.
