Abstract:
Association of Certified Fraud Examiners caution that globally, a typical organization loses at
least 5% its annual revenue through occupational fraud. Further statistics indicate that
occupational fraud risk is highest in commercial banks than any other industry globally.
Occupational fraud risk is therefore a global problem. The problem is that Kenya has the highest
incidences of fraud is East Africa. The study set to determine the effect of operational
governance on occupational fraud risk in commercial banks in Kenya. Using a positivism
research paradigm and a descriptive research design, a representative stratified sample of 30
commercial banks out of the 43 commercial banks licensed by Central Bank of Kenya by June
30, 2012 was used in this study. Principal Component Analysis, Varimax, Orthogonal was used
for Factor analysis. Kaiser-Meyer-Olkin test of sampling adequacy was used together with
Bartlett’s test of Sphericity to assess factorability of the predictor variable. Cronbach’s alpha
coefficient was used to assess the data collection tool for stability and consistency. Factor
analysis was used to asses construct validity. In order to test the null hypothesis, that is, there is
no relationship between operational governance and occupational fraud risk in commercial banks
in Kenya, model fitness, ANOVA and Regression coefficients were generated and interpreted.
The study found that there is a positive but weak correlation between operational governance and
occupational fraud risk. Further, the study found that the relationship is not statistically
significant. These results provide insights into the occupational fraud risk controls relevance and could guide the regulatory authorities approach to the design of antifraud controls in Kenya and
developing countries.
