Enhancing Efficiency of Pension Schemes through Effective Risk Governance: A Kenyan Perspective

Abstract: The efficiency of pension schemes in Kenya invites elevated interest owing to the increasing pension contribution amounts and the expectation that benefits paid out of these schemes would protect members from old age poverty. The study investigates the intervening effect of risk management on the relationship between corporate governance and the efficiency of pension schemes in Kenya. The study employs panel data consisting of 896 observations from 128 schemes in a sample period from 2015 to 2021. The study finds that risk management significantly mediates the relationship between employee representatives on the board of trustees, as a component of corporate governance, and the efficiency of pension schemes. Consequently, the mediation effect of risk management indicates that when employee representatives are involved in governance, the presence of strong risk management practices ensures that their contributions lead to improved efficiency. Risk management, therefore, serves as a critical safeguard that enables governance structures to function more effectively and contribute to the overall performance of the scheme.