Risk management and bank performance: a case study of First Atlantic Merchant Bank Ghana Limited (FAMBL)

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The recent financial crisis and scandal such as Enron have raised several questions with respect to the growing awareness and the need for appropriate Risk Management of financial institutions. It calls for thorough assessments of the structure and components of the risk management frameworks and practices of banks by regulators, analysts and financial watchers from time to time, to ascertain the adequacy of the systems, policies and procedures for managing risks as well as their conformity to current best practices. As a contribution to this exercise, this study is focused on First Atlantic merchant Bank Ghana Limited (FAMBL) with the aim of evaluating the bank‘s risk profile as well as assessing its risk management framework to ascertain its soundness and conformity to international best practices. This study also investigates whether efficient risk management translate into enhanced performance of banks. It combines and further develops relevant previous findings from two major areas of research: risk management, enterprise risk management (ERM), and their effect on bank performance. Analytical based approaches were adopted in assessing the risk condition of FAMBL. By applying analytical tools such as ratios, tables and charts, to the bank‘s 2010 financial statements, and those of years 2009 and 2008 serving as references for comparison. Trends and relationships in the financial statements and other financial data were also established. This helped in making well-reasoned analysis of the bank‘s capital adequacy, balance sheet structure and composition, profitability and reliability of earnings, credit exposure size and quality, liquidity, interest rate and currency risks situations.. The study also revealed that FAMBL had a fairly adequate risk management structures to ensure sound management of financial and operational risks. There was an appropriate environment in place for managing risk, in that; the governance structure was solid with clear obligations and lines of authority set out.
A Thesis submitted to the Institute of Distant Learning, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirement for the degree of Master of Business Administration, June, 2011