Financial Risks Management and Bank Profitability in Nigeria: Case of Access Bank of Nigeria Plc

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue IX, September 2020 | ISSN 2454–6186

Financial Risks Management and Bank Profitability in Nigeria: Case of Access Bank of Nigeria Plc

John Ugah
Research Student, Department of Banking and Finance, Faculty of Management Sciences, Univeristy of Calabar, Nigeria.

Abstract: The study examined financial risk management and bank profitability in Nigeria. With the aid of a well-structured questionnaire data were drawn from a convenient sampling technique; a sample size of 56 management staff of Access Bank of Nigeria Plc. Simple linear regression was used for the test of hypotheses using statistical package for social science software version 20. The study revealed that; there exist a significant positive effect of liquidity risk, credit risk, interest risk and inflation risk on return on assets of Access Bank Nigeria Plc. Based on the findings, it was recommended among others that banks should take proactive measures aimed at curbing financial risks as this will have a positive effect on their profit.

Keywords: financial risk, risk management, bank profitability.

I. INTRODUCTION

Over time, individuals, organizations and governments have been confronted with different unfortunate events occasioned by fire, burglary, social disruptions, environment degradation and life itself, all this, are examples of the risks which we faced and banks are not exceptions. It is not often possible to eliminate these risks, but the possibility of a loss can be mitigated by changing some of the circumstances relating to the loss. Because of the peculiarity of financial institutions as engine growth of a country’s economy, it has become more germane for banks to manage effectively the various types of risks which they confront, including but not limited to market risk, credit risk, liquidity risk, interest rate risk and inflation risks. In a bid to reduce this risk, banks should develop risk management strategies through an effective risk management framework. A risk management framework as defined by ISO Guide 73 is a set of components that provide the foundations and organizational arrangements for designing, implementing, monitoring, reviewing, and continually improving risk management throughout the organization. From the foregoing definition, strategic planning and organization operational policies should be enclosed with its risk management framework to enhance smooth decision making and actualization of the organization goal. According to Pandey (2004), to effectively manage risk does not mean to completely eliminate the different inherent risks common to an organization. For instance, the function of banks in advancing credit to customers has an inherent risks of possible default in repayment (credit risk) or loan delinquency but by accepting to take the risk, banks are able to charge interests for their risk taking activities which signals a profits to them. Imona (2012) stresses that exposing banks to financial risk is between acceptable limit enabling the bank to achieve a high

Read More