EFFECT OF RISK MANAGEMENT ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA: A CASE STUDY OF COMMERCIAL BANKS IN MOMBASA COUNTY
Abstract
This study sought to bring to light the need for financial institutions to pay attention to the management of risk. The issue in this research was to analyse whether risk management practices in Kenyan commercial banks helps to improve performance of the banks. The specific objectives were; to assess the effect of credit risk management on financial performance of commercial banks in Kenya, to determine the effect of liquidity risk management on financial performance of commercial banks in Kenya, to determine the effect of interest rate risk management on financial performance of commercial banks in Kenya and to assess the effect of operational risk management on financial performance of commercial banks in Kenya. The study concluded that operational risk management was the key variable in determining performance of commercial banks in Kenya. The study also concluded that credit risk management significantly affects the financial performance of commercial banks because of failure of counterparties to fulfil their obligations. The findings of the study also established that liquidity risk management significantly influences financial performance of commercial banks. The study finally concluded that interest rate risk management also had a significant influence on financial performance even though it had a weak positive correlation to the dependent variable
Key Words: Risk Management Practices, Credit Risk, Liquidity Risk, Operational Risk, Interest Rate
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DOI: http://dx.doi.org/10.61426/sjbcm.v5i4.988
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