Risk management practices in cash operations among Commercial Banks in Kenya

Abstract

The main purpose of this study was to investigate the risk management practices in cash operations among the commercial banks in Kenya. The specific objectives of the study was to investigate the forms of risks in cash operations and the risk management practices used in cash orations among commercial banks in Kenya. Respondents were asked to indicate the extent of use of risk management practice in use by their organization in cash operation. A survey of research design sought information from 44 commercial banks operating in Kenya where respondents were risk managers or senior operation managers in these organizations. Following data collection, data was analyzed using descriptive statistics with SPSS statistical package. The stud) showed that although there are a number of cash operation risk.s facing commercial banks. lack. of integrity among the staff members and the nature of businesses that the banking organizations deal with are the major cash operation risks that face the commercial banks. The study further established that cash operation risk management practices are very critical business process. due to the nature of business that banks engage in. That explains why there has been a huge investment to put in place adequate risk management practices across the industry in an effort to secure the banks business activities. To a very great extent each bank has engaged the use of the regulators guidelines which provides the minimum threshold of practices that must be used by all hanks in managing the cash operations risks. Various levels of exposures to risks. coupled with the need to increase operational efficiency through better risk management ha\e compelled the banks to engage in more practices that seem to tighten their control of risks that face them. Hence a very great extent also banks have engaged practices such as the, use of use of cash limit positions where there is a set maximum cash holding limit within which each till or branch must not exceed. observing dual control to process cash instructions and access to strong rooms. carrying out end of day reconciliation of all entries in the system and use of separate drawer y) each teller. use of cash registers to record movement of cash. To a great extent there is use of information systems and of fake currency detecting machines to manage

risks use of professionally qualified risk managers and use. To moderate extent banks ha'e appropriate disaster recovery planning. identification of stress situations and online processing of cash transactions to manage risks in cash operations. Cash operations risk management is part of wider operations risks management that the banks face and must deal with in order to achieve operational excellence. The complex processes employed to improve operational efficiency has increased the probability of failure or mistakes from the operations point of view that necessitates increased focus on managing operational risks to avoid losses and eventual downfall of the financial institutions