The effect of financial innovations on risk management of commercial banks in Kenya
Abstract
The purpose of this study was to to establish the effect of financial innovations on risk management of commercial banks in Kenya. Secondary data was collected from risk manual, financial products reports and audited financial reports of 18 commercial banks that made were selected to represent the 43 commercial banks in kenya. Data was analyzed using SPSS through correlation analysis, regression analysis ad autocorrelation techniques were used to analyse the data. The findings were presented in tables and graphs. The major findings of the study indicated that total new current accounts, total new savings accounts, credit reference bureaus and automated trading system at the stock exchange had a postive correlation with the overall risk management framework for commercial banks. On the other hand mobile banking and real time gross setllments had a negative correlation with the risk management framework.
The main conclusions were that financial innovations have exposed commercial banks in Kenya to various risks including credit risk, liquidity risk, strategic risk, interest rate risks, country risk, compliance risk and repuational risk and all these risks should therefore inform overall risk management of the institutions through a realistic risk index factor at any one period. The researcher recommends more robust risk mitigation practices and policies to ensure that all elements of risk are captured in the risk index factors of commercial banks. The researcher suggests that a similar study be carried out targeting MFIs to get their perspective of the effect of financial innovations on the risk management framework.
Citation
MBA-ThesisPublisher
School of Business