The Intervening Influence of Enterprise Risk Management on the Relationship between Board Practices and Performance of Government Owned Entities in Kenya

Abstract

The enterprise risk management is an integrated approach of risk management involving the executive management and board of directors including employees in identification, assessment, reporting and monitoring of strategic, operational, and financial risks across the entire organization. This paper seeks to establish intervening influence of enterprise risk management in the relationship between board practices and performance. The data was sought from all 234 government-owned entities operating in Kenya. 153 GOEs returned properly filled up questionnaires. Secondary data on performance were derived from performance contracting reports. The data was analyzed using AMOS graphics to obtain CB-SEM paths with the aid of IBM SPSS version 26. The conceptual model was built on three latent variables, namely board practices, enterprise risk management and performance. The findings indicated that direct impact of board practices was positive and significant at 60%. The study further established that enterprise risk management significantly positively impacted performance by 26.8%. However, presence by enterprise risk management framework as an intervening variable reduces impact of board practices to performance from 0.600 to 0.268, although it remains positive and significant. Hence despite presence of enterprise risk management, indirect influence of board practices on performance remains significant indicating partial intervention. The enterprise risk management was therefore found to have significant effect as an intervenor on the relationship between board practices and performance. It is therefore important for government owned entities to prioritize implementation of an integrated system of oversight that includes board practices and enterprise risk management framework in order to enhance their overall performance.