INFLUENCE OF ENTERPRISE RISK MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF COMMERCIAL MAIZE FARMING VENTURES IN NAKURU COUNTY, KENYA

Abstract

The large scale maize farming is often faces diverse risks that undermine the financial viability of the farming venture. These risks include variability in prices occasioned by changes in market factors, risks of pests, climate change, theft, low yield and poor seed quality. These risks work to undermine the financial performance of the large scale maize farming. This study sought to examine the manner in which enterprise risk management practices impacts on the financial performance of commercial maize farming ventures in Nakuru County. Specifically, it examined the influence of enterprise risk identification practices, enterprise risk assessment practices, enterprise risk mitigation practice, and enterprise risk monitoring strategies aspects on the financial performance of commercial maize farming ventures in Nakuru County The theoretical review involved the Contingency Theory and Rational Choice Theory. This study utilized a descriptive research design. The population in this study was comprised of the farm accountants of the commercial maize farming ventures in Nakuru. This study adopted the census approach in which all the 95 members of the population were picked for participation in the study. The study made use of a questionnaire as the data collection instrument. The pilot study for this research was conducted in ten commercial maize farming ventures in Kitale to avoid contamination of data. The results of the pilot study showed that questions were clear and there were no formatting errors thus the questionnaire was adopted for the final study. The validity of the study was examined using the opinion of experts in enterprise risk management, as well as the opinion of the research supervisor. All the items scored an Item Level Content Validity Index (I-CVI) above 0.6 and Scale Level Content Validity Index (S-CVI) of more than 0.6 thus were considered valid at both item and scale level. The reliability of the questionnaire was tested during the pilot study and since all variables had a Cronbach alpha coefficient of above 0.7it was deemed reliable. Descriptive statistics including percentages, frequency distributions, means, and standard deviations were used. On the other hand, inferential statistics including simple and multiple linear regressions were used to draw conclusions and make predictions. The multiple linear regression model indicated that for every one point increase in enterprise risk identification practices and enterprise risk monitoring strategies the financial performance of commercial maize farming ventures will decrease by 0.161 and 0.188 respectively, when other factors are held constant. For every one point increase in the enterprise risk assessment practices, the financial performance of commercial maize farming ventures will increase by 0.247 when other factors are held constant, and for every point increase in enterprise risk mitigation practices, the financial performance of commercial maize farming ventures will increase by 0.931when other factors are held constant. Thus, thestudy concluded that enterprise risk identification practices and enterprise risk monitoring strategies individually have a negative influence on the financial performance of commercial maize farming ventures. Additionally, the study concluded that the enterprise risk assessment practices and enterprise risk mitigation practicesindividually have a positive influence on the financial performance of commercial maize farming ventures. The study recommends that commercial maize farming ventures should have regular updates of risk registers, use ICT in carrying out risk assessments and evaluate the effectiveness of risk plans in order to realize better financial performance. The study suggests that future studies be carried out in other counties in Kenya to determine the influence of enterprise risk management practices on financial performance of commercial maize farming ventures. Researchers should also investigate the influence of enterprise risk management practices on financial performance of commercial farming ventures that produce other crops different from maize.