Internal Control Systems and Financial Performance of Private Security Firms in Nairobi City County, Kenya
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Date
2025-11
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Kenyatta University
Abstract
Effective internal control systems safeguard organizational resources, ensure compliance with laws, create further operative efficiencies, and thereby secure solid financial footing. Given that over the years it has been said there have been huge cash losses, the public's attention has been turned towards private security companies that engage in cash transit. Theft during transportation has also been blamed, not only on G4S security firms but also on other companies engaged in the same activity. Security officers with KK allegedly stole Ksh82 million while transferring it from Westlands to Central Bank of Kenya. In another incident, Wells Fargo security failed to protect Ksh94.9 million belonging to a local supermarket from loss during a cash transit operation. These incidents indicate that current private security measures are inadequate to secure business assets. Private security companies play an important role in maintaining the safety and security of commercial premises, residential areas, public gatherings, and other related activities. The study intended to determine the impact of internal control systems on the financial performance of private security firms in Nairobi City County, Kenya. The specific objectives were to assess the impact of access control on financial performance, evaluate the role of risk assessment, examine the effect of monitoring activities, and determine the influence of personnel skills on the financial performance of these firms. Agency Theory, Stakeholder Theory, Resource-Based View (RBV), and Capital Structure Theory formed the theoretical base from which the relationship of variables was viewed in a causal research design. The study involved a target population of 81 licensed private security firms from which a sample of 25 was chosen using stratified sampling. Data was collected using a structured questionnaire with closed questions. Data were summarized using descriptive and inferential statistics. Mean and standard deviation were used as descriptive statistics, whereas inferential statistics included regression analysis and ANOVA to investigate relationships and measure significant levels. To enhance the validity of the regression model and prevent any misleading results from materializing, diagnostic tests such as tests for normality, multicollinearity, and heteroscedasticity were carried out. Visual data representations included frequency, percentage tables, and charts. The study was carried out in adherence to ethical consideration where authorization approval was acquired from Kenyatta University and a research permit by NACOSTI. Results indicated that the internal control components, namely access control, risk assessment, monitoring, and personnel skills, together account for 75.5 percent of the financial performance of private security firms indicated by an R² of 0.755. Additionally, a very strong positive correlation of R = 0.869 was noted, thus signaling a strong joint impact of these control measures. A p-value of 0.003, which is below the 0.05 significance threshold, confirmed that these variables had a statistically significant effect on financial outcomes. The research remarked that strong internal control system especially those related to staff competence, access control, risk assessment, and continuous monitoring are essential in improving the financial outcomes of private security companies. It recommended that managers in these firms focus on consistently strengthening their internal control systems. In particular, the study emphasized the need for regular training programs to enhance employee expertise, along with coordinated efforts between stakeholders and policymakers to create a supportive environment for adopting internal control best practices within the private security industry.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Business Administration (Accounting Option) at Kenyatta University, November 2025