Financial Risk Management and Performance of Commercial Banks in Nakuru City County, Kenya

Abstract: The purpose of the study was to establish the effect of financial risk management on performance of Commercial banks in Nakuru City, Kenya. The study was guided by the following specific objective; compliance risk management on performance of Commercial banks in Kenya. This study adopted a descriptive research design. This study targeted the Commercial banks in Nakuru city Kenya. The Credit managers of the banks were targeted. The study adopted census survey and therefore all the credit managers in Commercial banks in Nakuru City were studied. 33 Credit managers were targeted from 11 banks. Data collection instrument used was questionnaire and other information relevant to the study. A structured questionnaire was administered to the respondents. Piloting was done to determine if the full-scale study was conducted in the way that was planned and whether there were some components that needed to be changed. Once data was collected, it was crosschecked and verified for errors, completeness and consistency. It was coded, entered and analysed descriptively using Statistical Package for Social Sciences (SSPS 28). Pearson correlation analysis was used to test the relationship between variables in the study hypotheses. ANOVA multiple linear regression analysis was also used to determine the statistical relationship between the independent variable and the dependent. The findings implied that banks may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory standards, best business practices, internal policies and procedures and codes of conduct applicable to its banking activities and that the current global compliance risk regulatory framework can be summarized in one sentence: compliance function must be established to manage compliance risk. The findings also showed that it makes sense to assume that appropriately designed and implemented compliance management systems aimed at establishing compliance responsibilities, communicating those responsibilities to employees and stakeholders, ensuring that responsibilities for meeting legal requirements and internal policies are incorporated into business processes, should improve compliance. The finds further revealed that compliance function should facilitate the implementation and maintenance of the compliance culture, arrange for or provide compliance framing, advise on regulatory matters, conduct monitoring, maintain line of communication with the regulator, handle regulatory issues, conduct reviews, provide reports and guidance to management, assist in identifying, assessing and managing regulatory risk. Through the findings, compliance measures that can address the priority compliance risks should be identified and the most suitable compliance measures selected based on an assessment of the costs and benefits of each measure and that banks conducting compliance work should consider adopting a risk-based approach as compliance management systems are sound and minimize excessive or serious future violations exposing the company to significant impairment of reputation, value, earnings, or business opportunity. Based on the findings, the study concluded that compliance has significant effect on Performance of Commercial Banks in Nakuru City County Kenya. β1=0.794, p value= 0.001). The relationship was considered significant since the p value 0.001 was less than the significant level of 0.05. The study came up with the following recommendations; the management of commercial banks should formulate a designed and implemented compliance management systems aimed at establishing compliance responsibilities, communicating those responsibilities to employees and stakeholders, ensuring that responsibilities for meeting legal requirements and internal policies should be incorporated into business processes to improve compliance. Keywords: compliance risk management, financial risk management, financial performance. Title: Financial Risk Management and Performance of Commercial Banks in Nakuru City County, Kenya Author: Salim Meshack Mwanzia, Dr. Julius Miroga, Dr. Elizabeth Nambuswa Makokha International Journal of Recent Research in Social Sciences and Humanities (IJRRSSH) ISSN 2349-7831 Vol. 11, Issue 4, October 2024 - December 2024 Page No: 102-114 Paper Publications Website: www.paperpublications.org Published Date: 19-October-2024 DOI: https://doi.org/10.5281/zenodo.13954761 Paper Download Link (Source) https://www.paperpublications.org/upload/book/Financial%20Risk%20Management-19102024-2.pdf