Operational risk management practices and performance of small and medium enterprises in kakamega county

Risk management has been identified as a vital process in the business institutions despite being less developed within the small business sector. Many developed countries record a time in history when entrepreneurial activities led to high economic development. This means that management of Operational Risk in Small and Medium Enterprises in developing countries and more so in Kenya can also lead to high economic development. It has been generally observed that most Small and Medium Enterprises (SMEs) do not survive to their fifth birthday (Hallberg, 2000) hence raising concern on their general performance. This article therefore investigates the effects of Operational Risk Management (ORM) practices on the performance of Small and Medium Enterprises. A cross- sectional survey design was adopted to establish the relationship between the key study variables. The primary data used in the analysis is based principally on a stratified random sample of 100 Small and Medium Enterprises respondents interviewed in 2015 in Kakamega Town. A range of secondary data sources served as the key bibliographic tools for identifying relevant work for review. Multivariate regression analysis was used to test the effect of the Operational Risk Management practices on the performance of Small and Medium Enterprises. The results show that there was a statistically significant positive effect of Operational Risk Management practices on the performance of Small and Medium Enterprises (overall beta value of 0.621 and significant). Given that there is a positive effect of regulatory compliance on the performance of Small and Medium Enterprises for instance, the government should proactively engage in creating a conducive environment in which the Small and Medium Enterprises operate.