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