Risk Management in Kenya — An Overview
By: King'Ori Mbuthia
Tags: Risk Management In Kenya, Employee Fraud, Consultancy In Kenya, Risk Management, Kenyan Writer

Why do vehicles have brakes? This is an important risk management question an I know there could be many answers for it.

The most obvious answer is that vehicles have brakes, to keep their occupants and other road users safe — and it is a great answer. But there are other ways for a driver to keep passengers safe. For example, everyone on the road could drive so slowly that they virtually eliminate any possibility of injuries even if a crash was to happen. That would of course mean that occupants would take a few times longer to get to their destinations.

Another good answer is that the reason why vehicles have brakes is so that they can move fast. Brakes make it possible for the driver to mitigate the danger that comes with swift movement. The faster you need your vehicle to move, the more effective your brakes should be. The needed power of your brakes may also be determined by the nature on the road on which you are driving and the size and weight of your vehicle.

Now think of your business as the vehicle and your risk management strategy its brakes. Thinking through the risks your business is likely to encounter and developing ways to mitigate them is a critical enabler for the implementation of your strategy for growth.

The concept of structured risk management is relatively new in the Kenyan business environment outside financial institutions. This, however, doesn’t mean that risk management is a new concept in any business. Risks and uncertainties are a common feature in business and entrepreneurs at different levels have always come up with ways of managing it.

There is a shop owner who doesn’t give goods on credit beyond a certain amount. There is the business lady in the local food kiosk who insists on payment before service etc. At a more sophisticated level, businesses such as supermarkets install anti-theft devices and employ retail sales representatives to monitor for shop lifting as they assist customers. Companies also put measures in place to curb theft by employees and so on.

The business environment in Kenya today is becoming more competitive by the day making it necessary for every business to speed up its innovation and uptake of new ways and of working. Any business that doesn’t adapt with speed is unlikely to survive.

The national terrain on which businesses operate, on the other hand, has become more and more treacherous with the hyper-globalization occasioned by the internet. Employees and criminals are much more tech savvy now than they were a few years ago and the penetration of social media has heightened the risk to your business’ reputation to astronomical levels.

Customers and other stakeholders are much more litigious than they were a few years ago. The recent suit by a senator against Kenya Airways and the one by lawyer Ahmednasir Abdullahi against KENHA are just two recent examples.

All the above developments have pushed the risks to businesses to the stratosphere. It is little wonder that many companies have established risk management departments. The input of these departments has become a critical part of the companies’ planning process. They are also involved in the day to day running of the companies and in formulation of the overarching company strategy on risk management.

While having a risk management department is a great step towards protecting your business, it is important to note that that sometimes the risks a business faces come from within. Kenyan statistics on this matter paint a grim picture for entrepreneurs. The number of people convicted for fraud in their workplaces increased by a whopping 60% in 2018 and the rise has continued steadily every year. A survey released by PriceWaterHouse Coopers in 2014 showed that fraud by mid-level managers were the greatest threat to the existence of Kenyan companies. You may be wondering what this has to do with anything.

The truth is, employee fraud usually thrives when organizational culture creates the right environment and motivation for it. Your risk management department is part of your organizational culture. While they may not be involved in unethical practices, they are likely to be so close to the workings of the company that they don’t notice when their colleagues have their hands in the cookie jar.

To mitigate on this, you may need to bring in fresh eyes outside the company, like an independent contractor from time to time. There many companies in Kenya that haven’t formulated a risk management strategy and neither do they have a dedicated department for this function. They need the services of a risk management consultancy from time to time.