Risk management and financial performance in financial institutions.

Abstract

This study aimed at establishing the effect of Risk Management on Financial Performance on Financial Institutions. Other objectives included: to establish the techniques of Risk Management employed in Stanbic Bank, to establish the Financial Performance, and to establish the relationship between Risk Management and Financial Performance. The study used a case study research design which combined both qualitative and quantitative strategies. The researcher used questionnaires to collect data from the employees of Stanbic Bank, Mbale branch who were the respondents. The quantitative findings were presented using tables, as for qualitative data the study employed descriptive method of data presentation. The study revealed that the bank uses different Risk Management techniques which included, the use of insurance, reporting of assets acquired to reduce cases of risk and effective communication in all departments among others. Further still, most of the respondents revealed that the level of Financial Performance was high in Stanbic Bank Mbale branch. The findings revealed that Stanbic Bank was experiencing increasing Financial Performance because of operating risk free activities in all their departments. The correlation analysis results also showed a positive relationship between Risk Management and Financial Performance in Stanbic Bank. Regarding the effect of the Risk Management and Financial Performance of Stanbic Bank, the findings revealed that Risk Management produces positive returns under unknown market conditions and it influences future investment returns with in the bank. Therefore it is evident that Risk Management is positively related with the level of Financial Performance in Stanbic Bank. This is so because most of the statements regarding the effect of Risk Management on Financial Performance were scored positively by the participants in the study. The study also revealed that the bank employs several Risk Management techniques which perhaps explain the increasing and consistent levels of Financial Performance in the bank because it was shown that the Financial Performance levels were increasing. Finally the study came up with a number of recommendations that can improve the management of risks in the bank. These included, identifying legal risk profile and targeting the hot spots earlier, employing enterprise Risk Management in banks, and carrying out a risk Financial Performance analysis.