A survey on strategic risk management practices by large commercial banks in Kenya

Every bank is faced with several types of risks key among them being strategic risk. In essence, a bank must accept certain levels of risk taking. into consideration the risk reward trade off as risks cannot be totally avoided. The strategic risks faced by any bank may vary in degree depending on the size of the bank, business complexities, business volumes, system sophistication and capability. Strategic risk is the current or prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions or failure to respond to changes in the competitive environment, business cycles, customer preferences or product obsolescence. \n \nAs such, strategic risk management is part of strategic management that entails positioning a firm within its environment (internal and external) to ensure continued success. The research was a census survey on 13 large commercial banks in Kenya. The objectives of the study were to determine the strategic risk management practices adopted by large commercial banks and the challenges faced by these banks in their strategic risk management practices. The researcher established that there is an appreciable level of strategic risk management practice among the large commercial banks as exhibited by the findings. \n \nThe study found out that banks have adopted strategic risk management practices and though there was a slight variance in approach between the banks, the most commonly adopted practice centered on strategic risk assessment, evaluation, monitoring, control and reporting. These strategic risk management practices are discussed in the ensuing sections in detail. The researcher recommends that banks invest more in automated strategic risk management tools which would enhance analysis and profiling of their strategic risk. It would also be appropriate to appoint senior managers as the strategic risk champions. Further study can be done on the relationship between corporate governance or strategic planning divisions and strategic risk management. Studies may also be done on the relationship between strategic risks and other risks in banks.