Assessing Determining Factors of Best Risk Management Practice of Ethiopian Commercial Banks
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Date
2016-01
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Abstract
The paper is about “Assessment and Evaluation of best risk management practices” of commercial
banks in Ethiopia based on fifteen commercial banks operating in Ethiopia. The number of
respondents was eighty. While collecting the requisite data, five points Likert Scale has been used.
The objective of the study was to critically examine determining factors of best risk management
practices of Ethiopian commercial banks i.e., types of risk facing a bank, The extent in which the
management and staff members of commercial banks understand and implement risk management
and if or not the staff members of the selected commercial banks aware of the risks associated with
their actions and goals. The study also examines how far the banks follow the guidelines of
National Bank of Ethiopia regarding risk management. For this study there are six independent
variables: understanding risk and risk management (URM), risk assessment and analysis (RAA),
risk identification (RI), risk monitoring (RM), Risk Evaluation (RE), required policy in place (RP)
and one dependent variable, RMP. Initially, data reliability was found by applying Cronbach’s
alpha. So regression model was applied to analyze the impact of independent variables on
dependent variables. From the analysis it was concluded that there were five variables which have
positive significance impact on the dependent variable RMP. The study also reveals that credit
risk, market risk and operational risk are the major risks to the bankers.
Key words: Commercial Banks, Risk Management, and Risk Management Practices
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Keywords
Commercial banks, Risk management, Risk management Practic