Abstract:
Performance of some banks in Kenya has been
declining leading to their collapse or receivership. This may be
attributed to many factors such as risk exposure. In bid to
protect the financial sector, Central Bank of Kenya therefore
directed all the banks to manage risks. One of the mechanisms
used by the banks to manage risks is risk committee. Some
banks established risk committees while others did not. There
is limited knowledge on the relationship between this risks
committee and financial performance in commercial banks.
This study therefore aimed at determining the relationship
between risk committee existence and financial performance
of commercial banks. The target population was all
commercial banks operating in Kenya. The study adopted
longitudinal research design that covered a period of five
years (2013- 2017). The study used secondary data extracted
from annual consolidated and financial reports. Information
on specific financial performance indicator was RoA (return
on assets) and risk committee existence was extracted from
annual reports. Data was analyzed using SPSS by way of
regression analysis. The study found that there is a significant
positive relationship between risk committee existence and
financial performance where the coefficient was r=0.299. The
results showed that the model explained 9% (R2 = 0.09,
Adjusted R2
= 0.1084, F (1) = 17.301, p=0.000, p˂0.05). This
shows that 9 percent in the variations of RoA can be explained
by risk committee existence. From the results, it is evident that
risk committee existence and RoA have a significant positive
relationship. The study recommends that commercial banks
should fully implement risk committees in their operations.
This will help the commercial banks to manage risk exposure
and improve their financial performance.
