Influence of Operational Risk Management on the Performance of Commercial Real Estate Entrepreneurial Investments in Kenya

Abstract

This study set out to investigate the effect of operational risk management on the performance of commercial real estate entrepreneurial investments in Kenya. The study adopted a descriptive survey design having a quantitative approach. The target population was 9,320 real estate entrepreneurs comprising 884 sourced from SoftKenya directory, 95 from the Kenya Developers Association, 320 from the Estate Agent Registration Board and 8,021 from National Construction Authority having their registered offices in Nairobi, Nakuru, Kisumu and Eldoret. A sample size of 384 participants was selected using a stratified random sampling procedure. Data was collected using an online questionnaire emailed to respondents. The collected data was analysed descriptively and inferentially using frequency distribution – mean and standard deviation, Chi-square, Pearson’s Correlation and multiple linear regression analysis with the aid of the Statistical Package for Social Sciences (SPSS), version 20.0. The significance of each risk factor was examined using Risk Significant Index method. From the study findings, operational risks were found to be relatively low in severity compared to technical, financial and environmental risks in the commercial real estate sector in Kenya. The level of management effort in mitigating sources of operational risk was also low. Management of operational risk coefficient attained a statistical significance, which leads to the conclusion that operational risk management affects the performance of commercial real estate entrepreneurial investments in Kenya. With more than 60% of the staff in the sector having low knowledge of risk management, bridging the skill and knowledge gap is critical for better risk management outcomes for the sector. This responsibility should be shared between the government and the real estate entrepreneurs. The government should create forums or curriculum where risk management practice and concepts are trained.