ABSTRACT Risk characteristics applicable to Micro and Small Enterprises in Kenya include: uncertain risk, a chance of loss, normally accidental, sudden and unforeseen. These characteristics make entrepreneurs think about risk, its impact on their businesses and how it can be managed. Risk management involves recognizing the risk possibility and putting mechanisms in place to prevent the occurrence or mitigating it to levels that will minimize losses. It is therefore important to determine the effect of risk management on performance of micro and small enterprises among jua kali firms in Eldoret town, Kenya. The study was guided by four specific objectives; to identify the features of risk management employed by MSEs, to examine the various risk types associated with MSEs, to determine the effect of risk on MSEs performance and to identify obstacles to risk management on MSEs performance. The descriptive research design was employed in the study. The target population of 1887 comprises of MSE operators mainly drawn from manufacturing, services and processing sectors within Eldoret town. A sample size of 190 respondents for the study was selected using stratified random and simple random sampling methods. Both primary and secondary sources were used to collect the data. The data collection instruments used questionnaire and interview. This study was guided by Fried. G (2009) theoretical model of risk management. The data from the research instruments were coded and analyzed using the SPSS by tabulating the data using frequency tables, correlation and regression values. Descriptive statistics, frequency tables, bar graphs and percentages were used to present the data, while correlation analysis was used to test the hypotheses. A regression model was utilized to infer correlations, and possibly causation, from the data-The research study provides many implications for financial management practices and contributes to knowledge of risk management of MSEs. The findings of the study revealed that leverage on financial structure, issue of collateral security, incapacity to go for technological advancement; tough competition and inadequate margin are among the risks associated with MSEs. There were significant relationships between features of risk, types of risk, effects of risks and obstacles to risk management associated with MSEs and MSEs Performance. The regression analysis results indicate strong positive relationship between risk management and performance MSEs. It was observed to be significant at 0.05 levels since all the p-values fall below the significant level of 0.05. The findings and recommendations of the study could assist the policy makers in the Ministry of Industrialization and Enterprise development in making appropriate decisions. The conclusion of the study was that proper development and application of risk management process will result to higher performance of MSEs.