Includes bibliographical references (p. 63-67).

Introduction -- Literature review -- Methodology -- Results and discussions -- Conclusion and recommendations.

"With the climate change predicted to increase, the recurrence and severity of droughts and floods are projected to rise. Building coping mechamisms of firms is crucial in reducing social-economic costs associated with droughts and floods. Scarcity of research on how firms cope with droughts and floods, and factors that affect their resilience remains a hindrance to policy interventions. This study sought to accomplish two objectives; first to understand the coping mechanisms employed by firms in Kenya to manage the impacts of drought and floods; and second to enrich insights on factors that affect firm resilience to the impacts of droughts and floods. The analyses employed a unique survey of about 800 firms across 27 Kenyan counties in three sectors: Wholesale and retail trade, accommodation and food services, and manufacturing. Descriptive statistics and regression analysis, principally bivariate Probit models and univariate Probit models were used to achieve the objectives of the study. Bivariate Probit Models were preferred for analysing choices firms make given multiple use of different coping mechanisms. This study systematically analysed hoe firms employ finance and non-finance coping mechanisms towards mitigating the impacts of drought and floods. Finance coping measures were further disaggregated into formal finance and informal finance; while non-finance coping mechanisms were further disaggregated into sustainable and unsustainable measures.
The findings suggest that firms employ multiple coping mechanisms including use of formal and informal finance, sustainable and unsustainable non-finance coping measures. The firms' choice of coping measures varies by firm-specific characteristics, geographical characteristics and the sector in which the firms operate. Moreover, the use of finance and sustainable non-finance coping mechanisms are shown to be complementary. This suggests the importance of deepening use of financial instruments as a strategy for building firm resilience to the impacts of droughts and floods. Costs imposed on firms through infrastructure are found to worsen resilience. The paper calls for deepening use of financial instruments; tailoring interventions to firm-level characteristics; and the need to enhance efforts in building resilient infrastructure such as electricity water and roads.