The effect of risk management practices on the Financial performance of commercial banks in Kenya
Abstract
large extent by guidelines put forward by the Central Bank of Kenya and also the
nature of the banking industry. In most cases banks had adopted a proactive and
enterprise wide approach to their risk management practices by have a risk
department with a manager, and had a documented risk management policy which
was fairly well communicated through out all levels of the organization from the
Board to Staff.
The study also found that some risk management practices do have significant effect
on financial performance more than others i.e. the existence of a risk management
policy and the integration of risk management in setting of organizational objectives
were considered to be the key risk management practices that had a direct effect on
financial performance. This means that although there are other determinants of
performance not included in the study, the banks can improve their performance by
focusing on developing strong risk management policies and integrating risk
management in the process of setting achievable organizational objectives
In a world that is constantly changing and with every change bringing about new
ways of doing business with different outcomes, risk and how to manage it has
become a critical issue. The recent global financial crisis served as a reminder that
risk management and how the same is practiced is fundamental if performance
objectives are to be consistently achieved. It has emerged that as business owners and
managers strive to improve and sustain performance they are now also required to
consider what risk management practices their organizations have adopted to avoid
falling short of their strategic objectives. This is even more so in the financial
services sector which was the most affected during the recent financial crisis.
The objectives of this study were to analyze the risk management practices
undertaken by Commercial Banks in Kenya and to determine and assess the effect of
these risk management practices on their financial performance. The risks facing
financial institutions are mainly classified into; strategic, operational,
Citation
Masters in Business AdministrationSponsorhip
The University of NairobiPublisher
School of Business