An Accounting Perspective of Risk Management in Financial Institutions using Descriptive Statistics

Abstract

This research aimed at establishing the relationship between risk management and its impact on the performance of commercial banks in term of profitability. To address the objective of the study both primary and secondary data were collected. The primary data was collected by use of a structured questionnaire on purposeful sampling of 50 respondents, all senior executives of a financial institution. The secondary data was collected from the annual published financials reports for the target sample; the data covered a period of six (6) years i.e., 2014 to 2019. The data from the two sources was analyzed by use of descriptive statistics and presented in form of frequency tables, charts and percentage.  The study reveals that risk management is vital in all commercial banks in that it is one of the major contributors to the income stream. Even after applying lending standards, credit monitoring, and credit evaluation to a significant degree, the majority of respondents agreed that clients still fail loan payments. According to the survey, all banks rely heavily on loans and advances. They have a significant role in the banks' net profit and gross earnings. According to the findings, the Bank should create and implement convenient credit policies and processes to draw in new loan customers and establish a long-lasting borrower connection in order to promote the lending function to the necessary level. The methods most frequently employed in credit analysis also include capacity, cash flow, and conditions. The borrower's character and collateral, or security, were two other important methods that banks used to grant credit to their clients.