THE EFFECT OF RISK MANAGEMENT DIGITIZATION ON ORGANIZATION PERFORMANCE OF COMMERCIAL BANKS IN NAIROBI CITY COUNTY

Abstract

This study examined the effect of risk management digitization on the organizational performance of commercial banks in Nairobi City County, focusing on customer risk profiling, fraud detection, and firewalls as key dimensions. Anchored in a positivist philosophy, the research employed a quantitative design, drawing on primary data from 152 employees across 38 banks, complemented by secondary sources such as financial statements, regulatory filings, and industry reports (2019–2024). Regression analysis revealed that risk management digitization significantly enhances performance, with a B-value of 0.221, a t-statistic of 3.203, and a p-value of 0.002. Specifically, customer risk profiling improved decision-making and reduced default rates, fraud detection safeguarded assets through real-time analytics, and firewalls strengthened data integrity and resilience. The model results indicated that digitization explains 14.2% of performance variation (R² = 0.142, Adjusted R² = 0.119), while a broader model incorporating process digitization strategies explained 39% of profitability variance (R² = 0.390, Adjusted R² = 0.318; F(4,34) = 5.424, p = 0.002). ANOVA results further confirmed statistical significance (F = 6.086, p < 0.001), validating digitization as a driver of performance. Correlation analysis demonstrated strong positive associations, with ATM banking (r = 0.644), agency banking (r = 0.578), and mobile banking (r = 0.536) emerging as the most influential. Internet banking also showed a moderate but significant correlation (r = 0.431). Secondary data reinforced these results, showing consistent improvements in returns on investment, efficiency, and customer satisfaction tied to digital innovations such as agency banking, mobile and internet platforms, and ATM networks. The WebIX Digital Presence Maturity Index placed banks at an “emerging” stage (49.15%), highlighting progress yet signaling the need for further investment in advanced digital maturity. Overall, the study confirms that risk management digitization significantly enhances organizational performance by improving efficiency, resilience, and competitiveness. However, the modest R² values suggest that additional internal and external factors also influence outcomes, underscoring the need for a holistic approach that integrates digitization with customer retention, employee capacity building, and strategic reforms.