The Effect of Management Practices of The Components of Bank Specific Risks on The Overall Risk Management Practice: in the Case of Commercial Banks in Ethiopia

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Date

2023-11-15

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AAU

Abstract

The general objective of the study is to examine the effect of Bank specific risk management practice components on the overall risk management practice in the case of commercial banks in Ethiopia. The study deployed descriptive and explanatory research designs. The target population of the study was commercial banks in Ethiopia. Sample respondents were selected from risk management divisions of sampled commercial banks at head offices, based on purposive sampling technique. A total of 170 respondents were selected as a respondent of this study. The data collection instrument employed was closed ended structured questionnaire containing 52 questions of five-points of Likert scale. The data was analyzed using descriptive statistics and regression analysis techniques The Statistical Package for Social Sciences (SPSS) version 24 was used to analyze the data. Out of the 170-questionnaire distributed to the sample respondents, 166 questionnaires were received back properly filed, making response rate was 97.7 percent, which is sufficient to produce reliable study results. According to the results of the descriptive analysis, commercial banks in Ethiopia have good practices for managing credit risk, market risk, liquidity risk, operational risk, and all other types of risk. They also have good practices for understanding risk, identifying risk, analyzing risk, monitoring risk, and controlling risk. The correlation analysis results also attested the positive and statistically significant association of risk management practice with its aspects. However, the results of the regression analysis showed that among the independent variables included in the regression model, operational risk management, liquidity risk management, risk understanding, managing market risk and risk identification, respectively have statistically significant positive effect on the practice of risk management, in commercial banks in Ethiopia. Therefore, putting in place a comprehensive and effective risk management arrangement is not only a successful endeavor to improve the performance of commercial banks, but also an essential procedure to satisfy regulatory obligations

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Keywords

Risk Understanding, Risk Identification, Risk Management, Risk Management Practice

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