The role of risk management practices on performance of petroleum distribution companies in Tanzania

Abstract

Petroleum distribution companies in Tanzania depend on imported oil for meeting their customers’ demands. This being an international business, it involves several risks ranging from foreign currency fluctuations to unstable crude oil prices. The current study examines the role of risk management practices on performance of petroleum distribution companies in Tanzania. The study was conducted based on four specific objectives which were; to determine the influence of hedging, insurance cover, diversification and contractual agreements on performance of petroleum distribution companies in Tanzania. The research was explanatory in nature and the dat were collected through questionnaire. The study used a total of 127 respondents from management and general management departments of puma, total and Engen Tanzania. The data were analysed by the use of multiple regression tool using SPSS software to examine the relationship between risk management practices and performance of petroleum distribution companies. The results of the study indicate existence of positive relationship between hedging, diversification and contractual agreement with performance of petroleum distribution companies. The findings furthermore detail that hedging influence the most on performance of the petroleum distribution companies compared to other variables followed by diversification and contractual agreements. The study recommended that managements of the petroleum distribution companies should invest more efforts on the three risk management attributes namely hedging, diversification and contractual agreements.