1.1. BACKGROUND OF THE STUDY
1.2 STATEMENT OF PROBLEM
Risk management is typically recognized as a technical discipline as stated in the last couple of decades. They also stated strong risk management practices in the banking industry are paramount important for both economic sustainability and financial stability as well. Furthermore, in the world of finance, risk is a major component attracted lot attention from researcher. Furthermore, According to Shafiq and Nasr (2010) Nigerian banking industry has confronted multiple risks including market risk, credit risk, foreign risk, operational risk, interest rate risk , capital adequacy risks and many more because of political instability, volatile economic environment of county as well. To that respect, Bagh, et al. (2017) stated that severe economic meltdown on both home and International forums is another shock because of unskilled public sector, prices hiking, governance crux, natural upheaval, pathetic associations, corrupt managerial practices and policies, low per capita income, tremendous increase in population growth rate, power distance, un- equal distribution of wealth, poor management, lack of funds, lack of quality of education, poor law and order state of affairs and Dearth of merit accordingly these all factors are accountable for wretched state of affairs. Therefore, the problem statement to be addressed is “The Underlying effect of Risk Management on the Performance of Banks in Nigeria: A case of Zenith Bank Plc” Abuja.
1.3. AIMS OF THE STUDY
The major purpose of this study is to examine effect of risk management on the performance of banks in Nigeria. Other general objectives of the study are:
1. To examine the major types of risks faced by Zenith bank Plc in Abuja.
2. To examine the risk management practices in Zenith Bank Plc, Abuja.
3. To examine the effect of risk management on bank performance in Nigeria.
4. To examine the steps used by banks to identify, assess and mitigate risk.
5. To examine the relationship between risk management and performance of Nigerian banks.
6. To recommend the risk management tools that can help improve bank’s performance.
1.4 RESEARCH QUESTIONS
1. What are the major types of risks faced by Zenith bank Plc in Abuja?
2. What are the risk management practices in Zenith Bank Plc, Abuja?
3. What is the effect of risk management on bank performance in Nigeria?
4. What are the steps used by banks to identify, assess and mitigate risk?
5. What is the relationship between risk management and performance of Nigerian banks?
6. What are the recommended risk management tools that can help improve bank’s performance?
1.5 RESEARCH HYPOTHESES
- There is no effect of risk management on bank performance in Nigeria.
- There is a significant effect of risk management on bank performance in Nigeria.
- There is no significant relationship between risk management and performance of Nigerian banks.
- There is a significant relationship between risk management and performance of Nigerian banks.
1.6. SIGNIFICANCE OF THE STUDY
This study has a number of significant dimensions. The result of this study should provide information to the Nigerian banks risk management department on the progress so far made in identifying and evaluating risks as to enhance growth and profitability of the financial institutions. The result of this study should also reveal how much such progress has impacted on the growth and performance of the entire banks in Nigeria. Essentially, this work is a step in a right direction to assist and enlighten the general public on what risk management in Nigerian banks is all about and hence guide them in their immediate decision of handling risks. Furthermore, there is need to provide a reference document for further researchers and evaluation of risk management conducted by other Nigerians/other Nations. This research work will go a long way to increase the availability of literature in the field of risk management in the banks and other related business associates that involve risk in the day-to-day running of the businesses. Finally, the study is of immense benefit to policy makers, investors, financial manager’s lecturers and the general public.
1.7 SCOPE OF THE STUDY
The study is based on the effect of risk management on the performance of banks in Nigeria, case study of Zenith bank Plc, Asa Street, Maitama, Abuja.
1.8 LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.8 DEFINITION OF TERMS
Management: – This is defined as the process of directing, co-ordination and influencing the operations of an organization so as to obtain desired result and enhance a total performance.
Banks- These are financial institutions, which accept deposit and other loans to the customers.
Credit:- A transaction between two parties in which one (creditor or lender) supplier money, goods, securities in returns for a promised future, payment by the other of debtor borrower. To sell or lend in the basis of future payment.
Money:- This can be defined as anything which passes freely from hand to hand and is generally acceptable in settlement of debt.
Hedging: According to (Ebhalaghe, 2010) defined hedging as a system employed to smoothen out unpredictable fluctuations in financial variables so as to aid planning and avoid embarrassment induced by cash shortfalls.
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