RISK MANAGEMENT PRACTICES IN THE BANKING SECTOR:
EMPIRICAL EVIDENCE FROM NIGERIA
The role of bank remains central in financing economic activity and its effectiveness could exert positive impact on overall economy as sound and profitable banking sector is better able to withstand negative shocks and contribute to the stability of the financial system. However, volatility of global markets, technological advancement, innovative new financial products and changing regulatory environments has made risk management a critical task for banking sectors today as they simultaneously mitigate and create risks. This study aims to investigate the current risk management practices within the banking sector in Nigeria through the administering of survey questionnaires to risk management experts of twenty one (21) commercial banks. Descriptive and one sample t-test statistical techniques are used to analyze the questionnaire. The results revealed that both credit risk and liquidity risk pose a potential threat to the banks market value while most of the banks have implemented the Enterprise Risk Management (ERM) framework. Overall, the regulatory approach/tools to risk management practices of these banks have been fairly average as few of these banks used sophisticated approaches, indicating that more still need to be done to enhance sound risk management practices of the banks. These results therefore show the need for regulatory agencies to be more proactive in formulating sound risk management framework for the betterment of the banks.
