Risk management: an analysis of Ghanaian Rural and Community Banks
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Date
2009-08-15
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Abstract
Over the years Risk Management has become the cornerstone of prudent banking practices across the globe. An effective and efficient risk management practice is therefore absolutely required in order to maintain financial soundness. Despite the contributions of Rural and Community banks (RCBs) to the banking industry in Ghana, they continue to face a number of challenges such as competition, ineffective risk management among others. Risk management has consistently become the major challenge of RCBs in Ghana.
The purpose of the research therefore is to examine the extent to which Ghanaian RCBs deploy risk management practice in addressing the types of risk affecting their operations.
The study was based on a questionnaire survey involving two gro\ips namely, respondents from RCBs and Bank of Ghana/ARB Apex bank. The RCBs respondents were selected from 47 out of the 126 rural and community banks using stratified sampling technique. 25 respondents were selected from 63 examiners and monitoring officers of the Bank of Ghana and ARB/Apex bank respectively. The study revealed that the four most important types of risk facing Ghanaians RCBs are credit risk, Liquidity risk, operational risk and legal /regulatory risk. The finding also showed that RCBs in Ghana were not efficient in managing risk affecting their operations. Consequently, the study recommended the enforcement of the regulatory function, the establishment of risk management department in the RCBs, the appointment of proficient staff to manage and serve as Board members, and the intensive training of RCBs staff on risk management practices.
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A thesis presented to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in Partial Fulfilment of the requirement for the Degree of Commonwealth Executive Master of Business Administration.