Effect of Non-financial Risk on Organizational Performance
CHAPTER ONE
OBJECTIVE OF THE STUDY
The Main Objective of the study is to appraise the effect of non- financial risk on organizational performance. A case study of Human right policy of spring light technology limited; The specific objectives include
1 To determine the nature of non- financial risk.
2 To determine the effect of non- financial risk on organizational performance.
3 To determine the effect of Human right policy of spring light technology limited on organizational performance.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Non-financial risk management
The objective of risk management is to create a framework that enables organisations to handle uncertainty and must be embedded within the broader organisational strategy (Dionne, 2013; Gates et al., 2012). As a result, managing risk has become a greater focus within financial services companies, driven by the turbulent external environment (including competition, regulation and increased stakeholder expectations) as well as associated internal pressures (Accenture, 2012; Chytas, Glykas & Valiris, 2011; GorzeńMitka, 2013). This twin-based challenge “requires companies to be alert and watchful so to detect weaknesses and discontinuities in regard to emerging threats and opportunities and to initiate further probing based on such detections” (Chytas et al., 2011: 460). The 2000s saw the rise of Enterprise Risk Management (ERM), an approach that encourages a broader, integrated perspective to be applied to risk (COSO, 2004). However, critics argue that a danger exists “of ERM lapsing into rule-based compliance and failing to become embedded in managers’ decision-making and business processes” (Arena, Arnaboldi & Azzone, 2010: 661). The reduced focus on risk as a strategic imperative can therefore result in a compliance-based approach and the ‘risk management of everything’ (Power, 2004). Kaplan (2010) acknowledges that risk is often overlooked in the strategy and performance management process of organisations stating, “Risk management must be introduced as a third pillar for financial performance” (Kaplan, 2010: 31). This third pillar of risk management would therefore add to the traditional two pillars of sustainable shareholder value creation, being revenue growth and productivity. Kaplan (2010) also highlights key future research opportunities, including to the role of leadership, the need for a detailed systems model, and risk management to be more formally embedded in an organisation’s strategy map. This holistic approach is supported by Sheehan (2009), who articulates the link between risk management and organisational performance as decision-makers are increasingly required to consider all types of risks and their relationship to organisational growth. In this regard, the focus on financial and credit risk within banks (and associated impacts on process and performance) is well documented; however, Mikes (2009) and Soin and Collier (2013) highlight the equivalent study of operational and business risk as necessary future research areas. Financial risks are based on decades of historical data and robust models; in contrast, non-financial risk has not been as clearly defined nor have robust quantitative models yet been developed. Consequently, broadening the role of the risk management function of an organisation to include non-financial risk has become a greater strategic imperative. Operational risk is defined as “the risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses” (Basel, 2011: 11). Contrary to financial risks, Jobst (2007) contends operational risks are generally not willingly incurred nor do they have an offsetting revenue return potential. Key examples of operational risk for a retail bank include system downtime, which may impact payments and transactions through its channels, and fraud (whether internal or external). Relationships between risks are also an important consideration: strategic risk can result in increased operational risk which, in turn, can result in downstream risks, such as reputational risk. Lemke and Petersen (2013) note that the difficulty in quantifying non-financial risk does not mean quantitative losses cannot occur.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.
This study was carried to examine Effect of Non-Financial risk on organizational Performance. Human Right Policy Of Springlight Technology Limited form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain Effect of Non-Financial risk on organizational Performance. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of Non-Financial risk on organizational Performance
Summary
This study was on Effect of Non-Financial risk on organizational Performance. Three objectives were raised which included; To determine the nature of non- financial risk, to determine the effect of non- financial risk on organizational performance and to determine the effect of Human right policy of spring light technology limited on organizational performance. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from staffs of Human Right Policy Of Springlight Technology Limited. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
Based on this, the study concludes that non-financial risk have significant influence on firms’ performance.
Recommendation
The study established that the level of firms’ intellectual capital improves performance. Based on this, the study suggests the need for quoted firms to disclose more of quality intellectual capital information in its financial reporting as it ensures higher return and IC is also crucial in competitive advantage and value creation. Firms would do well if they voluntarily disclose more information on this aspect.
The study also established that firms with effective risk management make higher profit. Thus the study recommends that firms should continue to improve on its voluntary disclosure on risk management in their reporting as it is essential for investors’ decision making.
References
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- Deep, R., & Narwal, K.. (2014). Intellectual Capital and its Association with Financial Performance: A Study of Indian Textile Sector. International Journal of Management Business Research, 4(1), 43–54.
