Lack of risk awareness blamed for business closures, unemployment surge
Business
By
Juliet Omelo
| Nov 11, 2025
A lack of risk management knowledge is being blamed for the closure of numerous businesses, a factor that is also driving up unemployment in Kenya.
Experts are urging the government to take a leading role in educating companies to help prevent avoidable failures.
According to Erad Organization's Managing Director, Stephen Gathai, many managers lack the necessary skills to identify and mitigate business risks.
“Most businesses are unable to identify and assess risks when starting out, leaving them vulnerable to catastrophic outcomes that often lead to closure,” he explained.
Gathai revealed that about 70 percent of businesses close before their fifth year of operation due to risks that could have been avoided.
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He emphasised that raising awareness and providing training on risk management would not only help firms survive but also contribute to alleviating the country’s growing unemployment crisis.
The call came during a risk management sensitization forum held in Nairobi. “The reason I initiated the Erad sensitization forum was to educate business owners on why business management is critical for profitability and growth,” Gathai said.
He warned that the closure of businesses directly affects employment.
“In Kenya, there is currently a job demand for over one million positions based on the number of young people entering the job market. When businesses close, it negatively impacts these numbers,” he said.
Gathai also noted that the Kenyan job market can accommodate only 40 percent of workers, and the wider African context is even more dire.
Each year, the continent faces a job demand increase of 11–13 million, yet only about 3 million jobs are created. With 80 percent of employment opportunities coming from SMEs, he stressed the urgent need for risk management education.
High operating costs, particularly heavy taxation, also make it difficult for companies to stay afloat, he added.
Echoing these concerns, Grace Kimani from Sanel Systems said lack of business knowledge and operational understanding is a key reason for company failures.
She urged industry leaders to partner with the government to offer workshops for startups, equipping them with essential skills in business management.
Experts also highlighted challenges in data protection and tax compliance. “Most business owners are not aware of the need to file taxes and remain compliant. This calls for unified efforts to educate them on the benefits of compliance,” Kimani added.
Kennedy Odede, founder of Believe Kenya, urged businesses to adapt to technological shifts and prioritize cybersecurity. “It is not only large companies that need risk management. Without it, businesses may struggle to grow revenue or access loans,” he said.