Operational Risk Management in the Telecommunications Industry: An Empirical Analysis of Airtel Kenya’s Enterprise Risk Framework

Abstract

The telecommunications industry operates within an increasingly complex and rapidly evolving environment characterized by technological innovations, digital transformation, changing customer demands, and growing regulatory pressures. These developments expose firms to operational risks arising from internal processes, systems, people, and external events, which may adversely affect financial performance. This study examined the effect of operational risk management on Kenya Airtel's financial performance. Specifically, the study assessed the influence of process risk, system risk, people risk, and external event risk on the company's financial performance. The study drew on a previous study on operational risk management and profitability of non-withdrawable deposit-taking cooperatives in Nairobi City, Kenya. Theories underpinning the study were risk management theory, financial distress theory, and behavioral theories of profit.  The previous study that anchored the present findings measured financial performance using Return on Assets (ROA), while operational risk variables were measured using various constructs. The data were analyzed using descriptive statistics, correlation analysis, diagnostic tests, and Ordinary Least Squares (OLS) regression. The findings provided empirical evidence on the relationship between operational risk management and financial performance in the telecommunications sector and will contribute to the growing body of knowledge on enterprise risk management. The study also offered practical insights for managers and policymakers on strengthening operational risk management practices to enhance organizational resilience and improve financial performance in the telecommunications industry.