Risk Management and Performance of Commercial Banks in Ntungamo District. A Case Study of Crane Bank

ABSTRACT The banking sector plays a very important role in the economy and the stability of the sector cannot be over emphasized .Global trends such as Basel framework requires bank to establish risk management systems to measure and mitigate risks. Several theories on risk management have been put across among them financial theory, agency theory, stakeholder theory and new institutional economics. Several studies have been conducted with bias towards tools and techniques adopted by various institutions on credit risk management. Study on the various risks encountered by commercial banks has not been conducted. This study sought to identify the risks faced by commercial banks to establish the relationship between credit risk management and performance of commercial banks; to investigate the relationship between Risk management and financial performance of Commercial Banks; the study also thought to determine the risk management practices adopted by commercial banks. A sample of 61 respondents was selected from the total population and the questionnaire was distributed in order to collect data to be analyzed using Microsoft Office Excel package and regression analysis was carried out in order to establish the relationship between the variables and the finding revealed that there was a significant relationship between the variables of the current research. Regression analysis showed that risk management significantly predicted 57.1 % of financial performance of commercial banks. Commercial banks were recommended to enrich and empower their risk management committee, credit committee and audit function since these are very instrnmental in the banking business. This will in turn bring about better performance in terms of better profitability, earnings and cash flows.