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Risk Management In The Financial Institution

(A Case Study Of Some Selected Banks)

5 Chapters
|
98 Pages
|
12,324 Words
|
Accounting

Complete Risk Management In The Financial Institution Project Materials (Chapters 1 to 5):

ABSTRACT

The aim of this study was to examine the impact of risk management in the banking sector of the Nigeria financial institutions. The study started with an attempt to state the problem that motivated the study, which financial institutions
Risk management was into the banking sector to help recluse the risk of systematic failure and avoid the disruptions caused by the financial crises in banks. The study there for, was done to access critically its impacts on Nigeria financial institution
The method for data collection was by questionnaire, we also made use of primary and secondary data fifty one questionnaires were administered, forty two were property tested with the use of chi –square (x2) statistical tool and the entire three nall hypothesis were rejected. We could conclude there fore, that there is a positive relationship between risk management and the dependent variable, namely prudential banking credit portfolio of banks and banks liquidity.
The feelings indicated that financial institutions eg. Banks now take minimized and calculated financial risks as a result of the impact of risk management
And it also medicated that confidence and stability have been restored in the banking sections as a result of the strict risk management regulations
The following recommendations among others were made that the center bank of Nigeria (CBN) need to ensure regular examination of banks so that problem of systematic financial risk could be detected early before the situations gets out of hands
Banks and other financial institution should as much as possible, employ qualified risk managers and staffs. Banking edacities is the aspect of risk management should be encouraged.

TABLE OF CONTENT

Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of contents

CHAPTER ONE
INTRODUCTION
1. Background of the study
1.1 Of the problem
1.3 Objective of the study
1.4 Research question /hypothesis
1.5 Significance of the study
1.6 Scope and limitations of the study
1.7 Definition of operational terms
References

CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 An overview of risk management
2.11 Meaning and purpose of risk management
2.12 Various types of financial institutions
2.2 The concert of risk
2.2.1 Various typed of risk that exist in financial institutions (banring section)
2.2.2 Credit risks
2.2.3. Capital risks
2.2.4 Interest rate risk
2.2.5 Liquidity risk
2.2.6 Operation risk
2.2.7 Contagion risk
2.2.8 Off balance sheet risk
2.2.9 Post folio risk
2.3 Various ways of risk control in financial institution like banks
2.3.1 The duties of a risk manager
2.3.2 The effect of a information technology as an improvement to the performance of the risk manager
2.3.3 Problems faced by the risk manager in managing risks in financial in managing risks in financial institutions like panes
2.3.4 Manageable and non-manageable risk in the financial institutions like banks
2.3.5 Prospects of effective risk management in the financial instillations like banks
2.3.6 Various classes of insurance that is available to the management of the insurance risks.
2.4 Impact of risk management in banking section of the Nigerian financial institutions
2.4.1 Risk management impact on capital risk
2.4.2 Risk management impact on credit and portfolio risks
2.4.3 Risk management impact on off- balance sheet risk
2.4.4 Risk management impact on operational risk
2.5 regulatory /supervisory authority’s role in risk management
2.5.1 Supervisory authorities responsible for banks liquidity management
2.5.2 Supervisory authorities responsible for banks off- balance sheet operations
2.5.3 Supervisory authorities responsible for banks off balance sheet operations references

CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 An doer view
3.2 source of data
3.1 Primary sources
3.2.2 Secondary sources
3.3 Population and samples size
3.4 Method of determining the sample size
3.5 Validity of the instruments
3.6 Methods of date presentation and analysis

CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 An overview
4.2 Personal dates
4.3 Hypothesis testing

CHAPTER FIVE
Summary of Findings, Conclusions Recommendation
5.1 Summaries of findings
5.2 Conclusions
5.3 Recommendations
5.4 Suggestions for further studies
Bibliography
Appendix i
Appendix ii

CHAPTER ONE

INTRODUCTION
1.1 BACK GROUND OF THE STUDY:
Risk management is a practice with processes methods, and tools for managing risks, but in its broadest sense, risk management embraces all efforts taken to minimize the impact of uncertain events in business, companies financial and non-financial institutions etc. It provides a disciplined environment for pro-active decision making to determine which risks are important to deal with and to implement strategies to deal with those risks.
The relationship between the survival of banks and national economic well being is borne our of the central position and crucial roles played by banks in the economy. The importance of the banking sector in any economy derives from its three functions namely, financial intermediation, provisions of an efficient payment system and facilitation of the implementation of monetary policies. Hence, an efficient and effective banking in essential not only for the promotion of efficient intermediation but also for the protection of depositors, maintenance of public confidence in banking institutions and above all attunement of steady economic growth.
The upsurge and the consequences of the rapid expansion on the financial system necessitated the need for greater attention to risk management and supervision of the financial institutions.
In 1990, the central Bank of Nigeria (CBN) introduce two important measures which marked the commencement of the new risk management regulations the first was the redefinition of banks capital adequacy by relating the capital requirements of banks to their risk weighed assets and not just loans and advances. It was essentially an implementation in Nigeria of the recommendation of the bank committee of Bank for International settlement (BIS) on a common international standard measurement of capital adequacy.
This provision following the deregulations as a principal factor in the risk structure of the bank.
The second measure was the climax of the new prudential banking guidelines, for the licensed banks. The prudential guidelines are not traditional monetary policy guidelines; rather they are financial stipulations to assist the banks in improving the assessment of their credit performance.
Generally, risk management involves the management of the mix of assets, liabilities and off-Balance sheet (OBS) contracts of a financial institution so as to control interest rate risks, liquidity risk and thus, optimize earning through stable net interest margins this interest rate is borne out of the regulators /supervisors, and risk manager’s duty to protecting depositors, ensuring monetary stability evolving an efficient and competitive financial system and protecting the customers.
Supervisors will have to maintain closer and regular contact with the institutions under their purview in order to be able to make informed judgments of their condition.
As a first step, the regulatory framework should through the licensing process promote the emergency of responsive corporate governance in financial institutions
The bank mangers and directors should be made aware of the various risks that could threaten the viability or survival of their institutions and to ensure their banks are adequately measuring and managing them efficiently.

1.2 STATEMENT OF THE PROBLEM
This study looked into the following problem.
i To identify the risk management process in banking.
ii To identify the different types of risk associated with banks
iii. To identify the factors considered in evaluating the financial risks.
iv. To identify the assessment method in risk management.
v. To identify the advantages of risk management in the financial institution
vi. To identify the economic rationale for management of the financial risks in the Nigerian financial institutions.

1.3 OBJECTIVE OF THE STUDY
The phenomenon of excessive financial risk taking and the wide spread failures and distress in the banking sector has of recent assumed an intractable dimension. The specific objective of the study aims at
i Finding out the need for risk management in the banking sector of the Nigerian financial institutions.
ii This study highlighted how risk management in banking has helped portfolio risk diversification.
iii The general objective of this study is to determine the extent at which the goals and objective of risk management in banking sectors have been achieved.
Iv To provide information about the operations of financial risk management and it’s contributions to the present and future economic growth and development of the country.

1.4 (A) RESEARCH QUESTIONS/ HYPOTHESIS
TO really evaluate the objective of this study, it became pertinent to ask some relevant questions and they are as follows.
i To what extent has the introduction of risk management effected the credit portfolio of banks?
ii To what exert has risk management improved debt recovery of banks?
iii To what exert has the goals of risk management banking been achieved?
iv Do you think that risk management in banking has had a positive impact on customers services
v. Do you think that risk management in banking improves banks liquidly?

1.4 (B) THE SUGGESTED HYPOTHESIS TO BE TESTED
i Ho: There is no significant relationship between risk management and prudential banking HA: there is a significant relationship between risk management and prudential banking.
ii HO: there is no significant relationship between risk management and credit portfolio banks.
iii HO: there is no significant relationship between risk management and banks liquidity.
Ha: there is a significant relationship between risk management and banks liquidity.

1.5 SIGNIFICANT OF THE STUDY
The importance of risk management to the survived and growth of Nigeria banks cannot be over emphasized, there fore:
i. This project will be of importance to the investing public and depositors, the governing authorities, the Central Bank of Nigeria (CBN) and other participating financial sectors.
ii. This study will be having immersed help to the students who may be interested in knowing more about this subject area.
iii. This will also serve as references to project consultants and risk management, in order for them to prevent any uncertain event in their business.

1.6 SCOPE AND LIMITATION OF THE STUDY
In carrying out this study, a survey of some selected banks in Nigeria was used.
The study covered both old and new generation banks like standard trust Bank PLC, All states trust banks PLC and union Banks of Nigeria PLC all are branches in Enugu state. And also, like every other research work, this study had some constraints which were, time constraints which made it impossible for all the data needed for the study to be collected. Financial constraint was also encountered

1.7 DEFINITION OF TERMS
RISK:
This refers to any situation arising out of organizations activities which can give rise to loss, injury, damage, liability or impediment to growth in social, moral and financial terms

CREDIT RISK:
This refer to the failure of counterpart to perform according to a contractual obligation and it is risk applied not only to loans but to other on and off-balance sheet exposures such as guarantees and acceptance

INTEREST RATE RISK:
This is the exposure of banks financial condition to adverse movements in interest rates.

LQUIDITY RISK:
This arises from the from the inability of a bank to accommodate decreases in liabilities or to find increases in assets.

OPERATIONAL RISK
This is a breakdown in internal controls and corporate governance that can lead to financial losses through error, fraud or failure to perform in a timely Mainer or cause the interest of the bank to be compromised.
CONTAGION RISK:
The could result from defaults in honoring inter banks exposures through the payment system.

REPUTATIONAL RISK:
This arises from operational failures to comply with relevant laws and regulations.

PORTFOLIO RISK:
This in variation of the return from a portfolio of combination of assets making up the portfolio.

BANK FAILURE:
This is a situation when the operational licorice of a bank has been with drawn by the central Bank as a result of insolvency and Managerial weakness of not been able to meet up with the daily banking activities and operational requirements.
BANK DISTRESS
This is a situation when a bank or any financial institution is plagued with severe financial and managerial weakness resulting to inability of the bank to meet up with its obligations to it’s customers and the economy, occasioned by fault or weakness in it’s operation which had rendered it illiquid and insolvent.

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Project Structure

The introduction of Risk Management In The Financial Institution should start with the relevant background information of the study, clearly define the specific problem that it addresses, outline the main object, discuss the scope and any limitation that may affect the outcome of your findings

Literature Review of Risk Management In The Financial Institution should start with an overview of existing research, theoretical framework and identify any gaps in the existing literature and explain how it will address the gaps

Methodology of Risk Management In The Financial Institution should describe the overall design of your project, detail the methods and tools used to collect data explain the techniques used to analyse the collected data and discuss any ethical issues related to your project

Results should include presentation of findings and interpretation of results

The discussion section of Risk Management In The Financial Institution should Interpret the implications of your findings, address any limitations of your study and discuss the broader implications of your findings

The conclusion of Risk Management In The Financial Institution should include summarize the main results and conclusions of your project, provide recommendations based on your findings and offer any concluding remarks on the project.

References should List all the sources cited in Risk Management In The Financial Institution project by following the required citation style (e.g., APA, MLA, Chicago).

The appendices section should Include any additional materials that support your project (Risk Management In The Financial Institution) but are too detailed for the main chapters such as raw data, detailed calculations etc.