The Effects of Risk Management on the Performance of Financial Institutions in Uganda Case Study: Bank of Baroda (Uganda) (Bobu), Kampala Main Branch

Abstract

The research study investigates the effect of risk management on Performance of financial institutions in Uganda, a case study of Bank of Baroda Uganda with 80 respondents selected. It was also inspired by the increasing number of financial risks in financial institutions despite the risk managers in the financial institutions in Uganda.

The study used two approaches of quantitative and qualitative research methods to generate data. The quantitative method focused on testing the effect of Risk Management on the Performances of Financial Institutions whereas qualitative method was employed to analyse the non-numerical respondents’ statements such as their views, reactions and attitudes towards risk management and performance of financial institutions. The study employed both primary and secondary data collection sources. Primary data was collected using questionnaire and interview guide while secondary data, the researcher used text books, reports, journals, and internet about the effects of risk management on the performance of financial institutions.

The study findings clearly indicated a positive significant relationship between how risk management that is financial risk management in form of credit risk management, liquidity risk management, market risk, and currency risk management among others on the performance of financial institutions. Therefore, in order for financial institutions to improve their performances, they should employ risk management in the institutions.

The study recommends that Government through the central bank should carry out compulsory sensitization of financial institutions implementation of the three risks including; liquidity risk management, credit risk management and the market risk management to be able to perform and attain the set goals, this will also increase their awareness on the issue of risk management in banks.

Financial institutions should always aim at holding more assets than liabilities to avoid issues of credit and liquidity risk that negatively affect the performance of many banks.

Financial institutions are advised to plan ahead before any shortcomings arise. This enables a bank to manage risks in any form.

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