BACKGROUND OF THE STUDY
The Parliamentary Accounting Committee (PAC) revealed that fraud cases had been prevalent in government departments including the Ministry of Higher and Tertiary Education, Science and Technology Development (MHTESTD). The Committee noted fraud cases through recurring audit findings such as funds embezzlement, dummy receipting, unauthorized and unsupported expenditure, flouting tender procedures, mismanagement of funds and management over rides by those charged with governance. The Auditor General (AG) of 2015 also reported that out of unsupported payments incurred were losses ranging from USD$ 3 million to USD$ 3.5 million. Innovation and Commercialization Fund (ICF) lost amount of USD$ 2.5 million owed to debtors through borrowings. However, National Education Training Fund lost USD$ 3.5 million to acquit Cadetship grants. AG's report of 2015 observed that Ministry of Higher and Tertiary Education lost about USD$ 1.8 million to dummy receipting in polytechnics and teacher's college. Analysis of AG report by ZIMCODD highlighted that inadequate risk based audit has negatively affected the financial performance of ministries as there is no audit committee for risk identification, assessment and monitoring in taking up risk management task thus IAF has been inefficient in accomplishing its audit plan, hence audit recurring perpetuated fraud activities.
EFFECTS OF RISK MANAGEMENT SYSTEMS OF FINANCIAL PERFORMANCE
Ping & Muthuveloo (2015) emphasized that survival of a firm can be determined by performance which is an indicator of profit or loss. They added that a firm's performance can be improved by a strong risk management system such as Enterprise Risk Management System (ERMS) which create and add value to the success of business through reduction of uncertainties and customer satisfaction.
Fraud Risk Reduction
According to Ndwiga et al. (2012), reduction of risks is done through monitoring and controlling by means of standard setting of policies to ensure minimization of risks. Kiragu (2014) asserted that risk reduction practice positively affects financial performance of an organization through loss control, risk mitigation and risk transfer to insurance firms. They explained that risk reduction practices significantly improve the return on assets of the firm. Shahroudi et al. (2012) in support confirmed that reducing exposed risk increases the quality of service as well as the firm's financial performance. They added that risk mitigation and financial performance has a positive relationship. Ernst & Young revealed that firms with a reputable risk reduction practices produce more revenue and their risk maturity linked with better return on assets and a positive significance on financial performance. A study by La & Choi (2012) proved that the effect of risk management has a positive significant relationship with the organizational performance. Wanjohi agreed that risk management has a significant positive correlation to the financial performance of an organization. Asemeit & Abuda concluded that a strong significant and positive relationship between financial performance of companies and risk management processes exists. However, the Auditor General (2015) report of the Ministry of Higher and Tertiary Education, Science and Technology Development depicts that lack of compliance in implementing a formal risk management structure causes a weaker link between performance and control systems in place.
There were some controversial findings by other scholars against the effects of risk management to financial performance. Mudaki et al. (2012) argued that rather than basing on risk management, organizations need enough capital to sustain its financial performance; therefore, firm's capital has a positive relationship. However, La & Choi (2012) posited that there exists a weak relationship between risk management and a firm's financial performance. They suggested that better performance can be affected mainly by board and management decisions than risk management. Retno & Denies (2012) argued that a company with better profits are engaged into smaller revenue generation with little efforts in risk management structures, hence a negative link between risk management and performance. However, Keisidou et al. (2013) found a negative and significant effect between risk management and return on equity, resulting in a weak relationship between the two.
Kiragu (2014) could not clearly assert on the effect of risk reduction on firm's financial performance. He asserted that firms' risk level should be strongly monitored and assessed to ensure improvement of performance. Bandara & Weerakoon (2012) posited that risk management is essential but the link between financial performance and risk management of firms is not clear.
Reviews of Auditor General (2014-2016) reflected that there are no corrective measures taken in the MHTESTD to reduce risks as the findings are still recurring. The PAC (2015) also supported that lack of risk reduction has been evidenced by the recurring of observations every year. However, according to Al-Matari et al. (2012), most of the empirical studies on the effects of risk management on performance had been done mostly in developed countries and in insurance companies in Kenya.
Paul et al. (2016) observed that organizational performance begins with supplying customers with distinct goods and services, attending to their queries consumer time saving. Keisidou et al. (2013) noted a positive and significant relationship between customer satisfaction and financial performance. Ghotbabadi et al. (2016) supported that the firm should make customers happy and keep faithfulness to them as this practice increase the firm's performance. They added that reducing risks increases customer satisfaction and result in a positive correlation with firm's performance. Al-Hersh & Saaty (2014) asserted that reduction in apparent risks result in good relationship with firm and customer and a customer has a tendency of maintaining relationship with service providers; hence a significant positive performance is attained by the firm. However, literature review by Mohammadi (2012) confirmed that reduction in inherent risks results in a positive relationship between the firm and customers' satisfaction.
Segoro (2013) argued that it is the customer's behavior and attitude that can cause a repetitive demand of goods or services not actually satisfaction by the firm. Yap et al. (2012) also argued that the firm's performance results from the aspects of economics and convenience by the other firm's branches. Segoro (2013) added that value of the firm is the major effect of the firm's performance as value has a competitive advantage.
Some literature review indicated neutral responses. Keisidou et al. (2013) noted that the relationship for customer satisfaction and performance is complicated as performance may be either positive or negative. La & Choi (2012) indicated that both customer satisfaction and loyalty are not useful in firm performance as they have no lasting effects to the firm's performance. Mohammadi (2012) showed that customer satisfaction has both positive and negative impact on the financial performance.
Value of the Firm
Waweru & Kisaka (2013) studied on the effects of implementing MS on value of the firm and observed that there exists a strong relationship between enterprise risk management and the value of a company as managing risks add value to the firm resulting from risk avoidance, mitigation, transferring and retention. Mohammadi (2012) supported that ERMS methods and techniques increase value to the organization and maximize shareholder and stakeholder values. Literature review by Retno (2012) evidenced that an overall risk based integrated system demands for a special level of overseeing of the company's portfolio of risks which is associated with strategic organizational goals resulting in increased earnings to the firm value therefore a significant positive between ERMS, firm value and performance exists. Nugroho (2013) affirmed enterprise risk management system has a positive and significant influence upon both company value and performance. He added that financial performance has ability to facilitate ERMS implementation. Research results by notable scholars, Muthohirin support that a significant positive influence that exists between ERMS and performance has a capability of connecting company's capital and value of firm. In support of the view, Bertinetti et al. (2013) agreed on the positive effect of ERMS to both value of firm and financial performance.
There are some critiques against the results of positive significance relationship between ERMS, value of firm and financial...