Risk Management Practice of Ethiopian Commercial Banks
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Date
2015-06
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Addis Ababa University
Abstract
The aim of this paper is to analyze the effectiveness of risk management practice of commercial
banks operating in Ethiopia. Information was obtained from 15 purposely-sampled commercial
banks by adopting concurrent mixed research design. Open and closed-ended questionnaires were
administered to 86 respondents from selected commercial banks. The questionnaires covered key
aspects of risk management including the importance of risk management practices, risk
identification, risk monitoring and nature of risk management practices. The main conclusions of
the paper are: risk managers perceive risk management as critical to their banks performance;
the types of risks causing the greatest exposures are credit risk, operational risk, liquidity risk,
interest rate risk and foreign exchange risk; there was a reasonable level of success with current
risk management practices and, banks are utilizing some of the approaches/techniques
traditionally used to manage risks. Overall, the findings suggest that banks operating in Ethiopia
are indeed risk-focused. Some recommendations were made and prominent amongst them were
that banks should give emphasis on staff training in the area of risk management and they must
make risk visible, measurable and manageable and ensure a meaningful risk culture throughout
all processes and activities.
Key words: Commercial Banks, Risk Management, and Risk Management Practices
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Keywords
Commercial banks, Risk management, Risk management Practices