FINANCIAL AND OPERATIONAL RISKS IN UNIVERSAL BANKS IN THE PROVINCE OF ALBAY

This study advanced a need to concretize universal bank risks in the contexts of rising incidence of frauds in varying degrees of scope and magnitude, internal to or external to universal banks in the Province of Albay. Objectives for this study include: a. Determination of financial and operational risks experienced; b. Identification of challenges faced in addressing and managing financial and operational risks; c. Assessment of the effectiveness of existing banking systems in managing financial and operational risks; and recommendation of measures for enhancing bank systems to improve financial and operational risks management The data domain for this study consisted of forty (40) universal banks with primary data generated through a survey questionnaire. Significant outcomes verified by this study include: Financial and operational risks are experienced at moderate levels, with market risks and technology and cybersecurity risks as dominant financial and operational risks experienced, respectively. The topmost challenges in managing risks are credit (financial), internal process, and human error (operational). Existing banking systems in the management of financial and operational risk management are moderately effective. The top three recommended measures for enhancing universal bank systems with respect to: a. Financial Risk Management -- first, general risk management; second, foreign exchange risk management; third, liquidity risk testing; b. Operational Risk Management -- first, senior management; second, governance; third, risk management environment identification and assessment principles. The study proposed several measures to mitigate financial and operational risks. Key recommendations include adopting dynamic credit scoring models that adjust to macroeconomic shifts, implementing market risk hedging strategies supported by real-time analytics, and enhancing liquidity planning through predictive cash flow forecasting and emergency funding strategies. On the operational side, the integration of regulatory technology (RegTech), continuous employee training, infrastructure upgrades, and the development of a risk-aware organizational culture were recommended to address compliance, cybersecurity, and internal process risks.