RISK MANAGEMENT PRACTICES IN THE BANKING
SECTORS:
THE CASE OF COMMERCIAL BANK IN DAR ES SALAAM CITY
BY
Timothy Joseph Mageni
ACKNOWLEDGEMENTI am glad to take this great opportunity to acknowledge everyone who, in one way or another, has put a hand in any kind of help, support, advice, cooperation and guidance. I wish also to express my sincere thanks to my course lecturers and all members of staff at the Dar es salaam center for consistent advice, support and encouragement they accorded me during the whole program.

DEDICATION
To the only true God, His beloved son Jesus Christ and His Holy Spirit. You have brought me this far, giving me strength and guidance through the journey. To you be all the glory and adoration now and forever more Amen.
This work is dedicated to my family members and all my brothers and sisters.

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ABSTRACT The main objective of this study was to assess risk management practices used by commercial banks in Tanzania. The study used both second and primary data in both qualitative and quantitative techniques. The study used both stratified and purposive sampling techniques. Primary data was collected through interviews, observation and questionnaires from six bank employees and administrators. The banks involved include NMB Bank, CRDB Bank, BACLAYS Bank, NBC Bank, EXIM Bank and DTB Bank. For Secondary data, the study used documentary review.
The study indicates that commercial banks continue to find it difficult to manage risks, as most commercial banks appear to be caught in a vicious cycle that moves between rapid growth in the ‘good’ times and virtual standstill when a crisis hits back. Findings indicate that all focused banks do constantly apply risk management procedure for example; risks mitigation manuals, proper monitoring and supervision of banking operation. The findings further concluded that risk management policy, employee involvement and management practice have significant effect on the risk management practice in commercial banks. But also, the findings showed that profitability has weak significant influence on the risk management practice.
Based on the foregoing findings; it is recommended that mutual understanding is needed so that, all parties should speak a common language and communicate more effectively. Business executives should be positioned to assess their company’s enterprise risk management process against a standard, and strengthen the process and move their enterprise toward the established goals. Future research can be leveraged off an established base. Legislators and regulators will be able to gain an increased understanding of enterprise risk management, including its benefits and limitations. With all parties utilizing a common enterprise risk management framework, these benefits will be realized.

ABBREVIATIONS BOD Board of Directors
BOT Bank of Tanzania
COSO Committee of Sponsoring Organizations of the trade ways commission
DTB Diamond Trust Bank
ERM Enterprise Risk Management
GDP Gross Domestic Product
HOD Head of Department
ISO International Standards Organization
MFIs Micro-finance Institutions
MOF Ministry of Finance
NMB National Micro-finance Bank
PFM Public Financial Management
SME Small and Medium Enterprise
TIC Tanzania Investment Centre
TIR Tanzania Investment Report
URT United Republic of Tanzania
TABLE OF CONTENTS
CHAPTER ONE
BACKGROUND INFORMATION
Introduction
This chapter introduces the main topic that this research is going to examine throughout the study. It starts to describe the background history, statement of the research problem, research questions and research objectives both general and specific, moreover it also indicates the significance of the study, scope and limitations the study.

Background
The presence of risk is not a new phenomenon. It has continued to plague man and his endeavours since the beginning of time, from the primitive social structure of his ancestors to the modern day organization, Skipper, et al (2007). In Tanzania, Banking industry was introduced by Germans in 1905, following the introduction of money on a reasonably large scale in the country by the Germans. In that regard the commercial banks like Deutsche ostaafrikanische (1905) and Handleshank fur Ostafrika (1911) were established in Dar es Salaam and Tanga respectively. After the defeat of German in the First World War, the British banks which were operating in Kenya and Uganda were extended to Tanganyika. These banks were National Grid lays Bank, the Standard Bank Limited and the Barclays Bank D.C.O. As the time went on other banks opened their branches in the country but the three British banks continued to be dominant of commercial banking in the country up to the year 1967 when private banks were nationalized following the Arusha Declaration. During 1984/85 budgets, the financial reforms began gradually and was intensified in 1986 with Economic Recovery Program(ERP) the main aim of ERP, among others, were to reduce monetization of deficit, reduce credit expansion and direct more credit to private sector. In 1988, a Presidential commission of inquiry in Monetary and Banking system in Tanzania was established and Banking and Banking industry Act was passed in 1991 to implement the Banking industry reform through the existing Banking industry restructuring. Other objectives were to promote private banking, to deregulate the capital market and strengthening of legislative and supervisory powers of central bank. Private Banks and Banking industry (domestic and foreign) were allowed to enter the market freely. Since 1992, the banks were also given freedom of determining both deposits and interest rates to be charged to both deposits and lending. Due to the fact that banking industry was under the government control, there were few types of risk that faced these commercial banks during that time. In 1997 the Bank of Tanzania categorized risks that existed as liquidity risk, credit risk and interest rate risk. In most cases these types of risk at that time resulted due to default from borrowers not paying back on maturity. Some of the reasons why there was little risk were that, there were no competition among commercial banks and that the technology used was also poor. Currently, the economic environment in which most commercial banks operate is highly volatile and uncertain. The increase in volatility and uncertainty of international financial markets has generated increased financial risk to commercial banks Hillier (2003). One of the main factors contributing to this phenomenon is the increased market globalization and internationalization which is reflected in increased exchange, interest, inflation rates fluctuations as well as in high competition, demand levels etc. Elkington et al (2002), show that, there is a strong relation between risk management and success of an enterprise. The volume of resources spent in risk management activities is a fundamental factor to enterprises performance. An early involvement of risk management will create better conditions for the firm.

Statement of the problem
The problem of fear of risks which are facing Banking industry, especially banking industry is a global phenomenon as per the study undertaken by Wade et al(2004).Treasury management is the efficient management of financial risk and liquidity of the business; it is often called risk management, which is simply managing risks facing banks Hillier (2003). In recent times, risk management has often been in the news especially in situations where things have gone wrong. Efficiency risk management has become a critical element of banks’ sustainability and growth. Therefore, any problems in the risk management have an immediate effect on; banking industry, financial markets, and financial systems at large. The efficient management of the risk has an impact on the sustainable growth of the banking industry and economy at large. The trend of changing economic environment and, hence free and open market operation in the financial market in Tanzania compels most commercial banks to determine how they can best adapt to currency trading, position management and currency risk management. These efforts of trying to adjust to economic changes via privatization and open market policies are not only inevitable, but also of interest in the performance of the banking industry in light of the reforms. The other concern is that commercial banks hold larger deposits compared to other financial or noncommercial banking institution. A common problem in managing banking risk is that most banks only realize that they have been at risk when losses have occurred. In an ideal situation however, risk management in the banking industry should begin before the exposure occurs, otherwise fundamental operations, investing and financing decisions would be taken on the basis of incomplete information Hillier (2003). Risk management is an issue in all operations of banking industry thus an efficient management of risk is of vital importance for both banks and regulatory bodies. It is for this reason, that this study was designed to examine the risks management practices in banking industry, taking a case study of commercial banks in Tanzania. Spinard et al (2005) examined 200 senior finance and risk management executives and found that 41% of commercial banks were implementing some form of enterprise risk management (ERM), 70% of the banks pursuing risk management were very confident in their ability to manage risk compared with 85% of those not using risk management practices and 94% of the entire banking industry believed that risk management could improve their companies price earnings ratios and cost of capital. It was therefore the intention of this study to see that all commercial banks implements risk management for the growth and improving of internal controls of their activities in moving towards achievement of their established objectives in the industry. The most recommended framework is that of Committee of Sponsoring Organizations of the Tread way Commission (COSO) which designed internal control integrated framework.

1.4 Study Objectives
This section covers the research objective examined throughout the study.

1.4.1 General Objective
The General objective of the study was to assess risks management practices on banking industry, taking a case of commercial banks in Tanzania.

1.4.2 Specific Objectives
Specific objectives of the study are;
i. To assess different management practices taken by commercial banks in the management of risks in Tanzania.

ii. To examine the extent to which employees are involved in risk management practices
iii. To investigate whether risk management practices conform to risk management policy.

iv. To examine the effects of risks management practices on the sustainability of profitability of commercial banks in Tanzania
1.5 Research Question
The study is guided by the following research questions:
i. What ways does management practices taken by commercial banks adequately influence risk mitigation in banking industry in Tanzania?
ii. What extent do employees involved in risk management practices?
iii. How does a risk management practice conform to risk management policy in commercial banks?
iv. What are the effects of risk management practices on the sustainability of profitability of commercial banks in Tanzania?
1.6 Significance of study
There are relatively few studies which have been done in Tanzania to assessing risks management practices in banking industry. The findings of this study will therefore assist the banking industry in Tanzania in trying to initiate better instruments of managing risks. The findings will further assist banking industry to invest their resources more efficiently, making changes to crucial risks management policies and elicit the health banking operation. Moreover the outcome of the study would deliberately assist financial reforms in Tanzania to take effectively. Experts might take some passionate actions towards enriching good strategies of risks management in banking industry.

This research provides a foundation for the development of an effective risk management program, containing both the definitions and the practical guidance necessary for assessing and mitigating risks identified within banking industry. The ultimate goal is to help banking industry to better manage its operations related mission risks. In addition, this study provides information on the selection of cost-effective controls. These controls can be used to mitigate risk for the better protection of mission critical information and the organization systems that process, store, and carry this information.

Scope and delimitation of the study
This study covered risk management practices that influence the sustainability of profitability on banking industry, specifically in commercial Banks. The study was limited to commercial banks that are supervised by the Bank of Tanzania (BOT) and they focus on sustainability of profitability, Market share and all segments of customers. This study did not take into account Microfinance institutes (MFIs) such as; FINCA, PRIDE, SEDA and BRAC, SFIs, SACCOS and NGOs, SMEs. The reason for not taking into account was that, those institutes focus only on sustainable credit systems for economically disadvantaged people like women, villages and other low income people.
Commercial banks face many risks, such as liquidity risk, operational risk, compliance risk, legal risk, market risk, foreign exchange risk, interest rate risk, equity price risk and credit risk. This study specifically focused on risk management practices in commercial operations and not other supporting operations. Moreover, the study covered all commercial banks, basing on this reason only six listed banks were assessed. The choice was due to the fact that commercial banks have high concentration of customers
Limitations
This study was conducted in only six commercial Banks basing on Dar es salaam city due to ease accessibility of Data, Financial limitations and Time constraints allocated for the study. The researcher therefore was able to distribute questionnaires and to conduct interview with the staff members of aforementioned Banks. The researcher encountered the following difficulties during the study:-
Time constraints: Time required to complete this study was not enough since the study was so wide, too demanding to be accomplished within the short time allocated.
Financial problems: The study needed a lot of money to cover for transport, stationery and processing of document and other miscellaneous expenses. Financing a whole research from proposal preparation to data collection and writing the final report of the study was a big challenging obstacle.
Confidentiality of Information: Some respondents were not willing to provide some of the important information required in the study. Some information was not easily provided because it was treated as confidential. Alternatively, potential respondents like directors and heads of departments were simply too busy to cooperate. All the above constraints were likely to have some negative repercussions on the quality of the research work. For the purpose of mitigating the adverse effects on the study by the limitations pointed above, the researcher did the following.
Time constraints: The researcher prepared a work plan indicating the activities on daily basis and the time required to completing each piece of work. This was done by synchronizing the activities of data collection, recording, processing, and analysis. The researcher also strives to use sample size that were manageable under the specific time constraints.
Unwillingness of respondents: The researcher explained the importance of assessing risk management practices in banking Industry in Tanzania specifically in Commercial Bank in Dar es salaam Hence, he was able to convince some of reluctant respondents to release some information.
Confidentiality of information: The researcher strived to alley the organizational concern on confidentiality by persuading them to believe divulging the information would not harm the organization or individual. However anonymity of the individual participants was kept.

Financial constraints: To mitigate financial limitations the researcher insured the sample size was reduced to be reasonable and at adequate level, as well as the use questionnaires, interview and observations so as to minimize costs of transport and stationery.
Organization of dissertation
The first chapter of this study includes Introduction part, Background information, statement of the problem, research objective, and research question, scope and delimitation of the study, and limitations. The second chapter covers Literature review which carries introductory part, conceptual definitions, Empirical part, conceptual studies on risk management and relationship among variables and concept framework model. Chapter three is about of research methodology which consists of research design, study area, study population, research variables and their operationalization, sample size and sampling technique, types of data, data collection tools, data analysis methods and interpretation reliability and validity issues
Chapter four consists of presentation of findings, chapter five is for discussion of findings and chapter six is for summary, conclusion, and policy implications and recommendations. The dissertation also has References and Appendices
CHAPTER TWO
LITERATURE REVIEW
Literature review explores more in details about the topic of the study. All available literature concerning the problem at hand is necessary to be surveyed and examined.

Kothari (2004) suggests that, literature review involves reviewing different theories and various empirical literatures relevant to the research subject with the view of expanding knowledge and familiarizing the user with the opinions of different authors with regard to risk. This chapter reviews related literature in the area related to risk management practices.

Banking industry
On account of the multifarious activities of a modern bank, it becomes very difficult to give a precise definition of the word “Bank” The Oxford dictionary define a bank as an establishment for the custody of money which it pays out on a customer’s order. Also, a Bank is an institution whose debt (bank deposit) is widely accepted in settlement of other peoples debt to each other. In this study bank is defines as “An institution for the custody of money which it pays out on customers’ order and bank itself in acceptable environment”. According to Mithan et al (1990) there are four types of Banks, these include: Commercial banks, Co-operative banks, Special banks, Central bank.

Commercial Banks
Commercial banks are joint stock companies dealing in money and credit. A commercial bank can be defined as a Banking industry that accepts cheque, deposits of money from the public and also uses the money with it for lending. The most distinctive function of a commercial bank is that it accepts deposit called demand deposits from the public which are chequable. They normally give short term loans and advances.
Co- operative Banks
Are group of banking industry organized under the provision of the Co- operative societies Act of the states. These banks are essentially co- operative credit societies organized by member to meet their short term and medium term financial requirements. The main objective is to provide cheap credit to their members. They are based on the principles of self- reliance and mutual co-operation.
Special Bank
There are specialized forms of banks catering to some special needs with this unique nature of activities. There are thus foreign exchange banks, industrial banks, development banks, land development banks.

Central Bank
A central Bank is the apex banking industry in the banking and financial system of a country. It is regarded as the highest monetary authority in the country. It acts as the leader of the money market. It supervises control and regulates the activities of the commercial banks.

Risk
Risk is a function of the likelihood of something happening and the degree of losing which arises from a situation or activity. Losses can be direct or indirect; the chance of something happening will impact the achievement of objectives Chaudhury, (2005) and Thomas, (2004).

According to Heinz-peter berg (2010), risk is unavoidable and present in every human situation. It is present in daily lives, public and private sector organizations. Depending on the context (insurance, stakeholder, technical causes), there are many accepted definitions of risk in use. The common concept in all definitions is uncertainty of outcomes. Where they differ is in how they characterize outcomes. Some describe risk as having only adverse consequences, while others are neutral. Other definition by Slovic et al (2002).risk is defined as the volatility of a corporation’s market value. The types and degree of risks an organization may be exposed to depend upon a number of factors such as its size, complexity business activities, volume” Likewise, in everyday discourse, “risk” can be referred to a hazard, a probability, a consequence, a potential adversity or threat, and even at times an opportunity. All of these elements indeed characterize risks; ISO 31000 (2009) provides a general definition of risk as an “effect of uncertainty on objectives”. It follows from this definition that managing risks is not a process that is added on top of other managerial decision-making systems. When assessing risks management practices in the entire Banking industry in Tanzania, it is important to have a consistent definition of the term ‘risk’. For the purposes of this paper, one description of risk by Treasury (2004) is that risk refers to the uncertainty that surrounds future events and outcomes. It is the expression of the likelihood and impact of an event with the potential to influence the achievement of an organization’s objectives. The definition that has been selected is as broad as possible and it is fit for this study.

Risk management
Risk management can be defined in many ways. For example, Anderson et al (2006) maintain that basically, risk management can be defined as a process that should seek to eliminate, reduce and control risks, enhance benefits, and avoid detriments from speculative exposures.

ISO 31000 (2009); COSO (2004), and others developed standards that help manage different risks at various levels. Risk management refers to a coordinated set of activities and methods that is used to direct an organization and to control the many risks that can affect its ability to achieve objectives. According to ISO 31000 (2009), the term risk management also refers to the architecture that is used to manage risk. This architecture includes risk management principles, a risk management framework, and a risk management process.

Emenugu (2010) defines risk management as a process of thinking systematically about all possible risks, problems or disasters before they happen and setting up procedures that will avoid the risk, or minimize its impact, or cope with its impact. It is basically setting up a process where you can identify the risk and set up a strategy to control or deal with it.

Also, it is the process whereby organization methodically addresses the risks attaching to their activities with the goal of achieving sustainable benefit. Brown bridge (2002) risk management entail processes like identifying, assessing and judging risks, assigning ownership, taking actions to mitigate or anticipate them and monitoring and reviewing process.
This study adopted COSO’s (2004) definition which explains risk management as a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. The definition is valid to this study because it is purposefully broad. It captures key concepts fundamental to how companies and other organizations manage risk, providing a basis for application across organizations, industries, and sectors. It focuses directly on achievement of objectives established by a particular entity and provides a basis for defining enterprise risk management effectiveness.

Risk Management Policy
According to ISO 31000 (2009) defines a policy statement as a general commitment, direction, or intention. A risk management policy statement expresses an organization’s commitment to risk management and clarifies its general direction or intention. Kwasi (2010) in his report Risk based assessment of ECOBANK Ghana LTD he defines Risk Policy as a document containing procedures, processes and techniques for handling various risks that has also been approved by the board. He further urges that relevant tools and management information systems as well as effective controls were in place to ensure adequate and consistent identification, measurement, monitoring and controlling as well as reporting on the various risks the bank is exposed to. These structures were also in line with internationally accepted principles for managing risks as put forward by the Basel Committee for Banking Supervision and expected to be implemented by all banks operating in Ghana as they have incorporated in the Ghana Banking Act 2004, Act 673.

Omers (2013), describes Policy as a document that sets out a general framework of roles and responsibilities of the Board and the Enterprise Senior Leadership Team (ESLT) for the measurement and management of key risks across the enterprise. This policy document must be approved biennially by the Board.
COSO (2004), described policy as an Internal Control – Integrated Framework that help businesses and other entities assess and enhance their internal control systems. That framework has since been incorporated into policy, rule, and regulation, and used by thousands of enterprises to better control their activities in moving toward achievement of their established objectives.

Employee’s Involvement
Work cover Guide (2001) defines employee involvement as consultation. The guide further explains that consultation is a central feature of risk management because involving the people who do the work in identifying hazards and deciding how to control risks is the most effective way to manage workplace health and safety. These people know the job, know what is needed to make the job safe, know the production process, and above all know how best to solve problems so that hazards are eliminated or controlled. He further argues that this can only be achieved by having policies and procedures in place.
According to Peterson et al (2000), states that employee involvement is a term that has been used in the literature on organizations to refer to individuals’ attachments to both organizations and their jobs. Lodahl et al (1965) define job involvement as the degree to which a person’s work performance affects his/her self-esteem. They also argue, based on their research findings, that employees who are highly involved in their jobs are also high involved in their organizations.

According to Lawler et al (1989), employee involvement is a participative process that uses the entire capacity of workers and is designed to encourage employee commitment to organizational success Moreover, employee involvement is understood as a variety of techniques designed to achieve the objective of giving the employee some combination of information, influence and or incentives Cotton, (1993).

Grazier (1989) provides a more descriptive definition of employee involvement: It is a way of engaging employees at all levels in the thinking process of an organization. It is the recognition that many decisions made in an organization can be made better by soliciting the input of those who may be affected by the decision. It is an understanding that people at all levels of an organization possess unique talents, skills, and creativity that can be significant value if allowed to be expressed. The study adopts this definition all times as is broad and valid to the study. The same can be measured by levels of engagement.

Risk Management Practice
Wagner, (2008), defines risk management practices as risk mitigation action that refers to actions that must be taken to lower the likelihood of the risk occurring and or to minimize the impact if the risk did occur. Risk can never be totally eliminated, but it can be mitigated to lessen its likelihood and or impact
Pyle (1997), defines risk management practice as developed strategies to manage it, and mitigation of risk using managerial resources. Some traditional risk managements are focused on risks stemming from physical or legal causes. According to the Stafford Act (44 CFR 206:401)
Risk management practices in industries are defines as Hazard Mitigation that means any action taken to reduce or eliminate the long-term risk to human life and property from natural hazards.

Risk Management Practice Attribute
Contrary to the suggested Risk management phases by Clusif (2008) and ISO guide 31000 (2009) No.73, which demands adoption of 4 components which includes Risk assessment, Risk treatment, Risk acceptance and risk communication. For this study, the research developed Risk management framework finds suitable for banking industry in Tanzanian context based on COSO (2004) risk management integrated framework.

These are derived from the way management runs an enterprise and are integrated with the management process. The framework’s components consist of;
Internal Environment
According to COSO (2004), the internal environment encompasses the tone of an organization, and sets the basis for how risk is viewed and addressed by an entity’s people, including risk management philosophy and risk appetite, integrity and ethical values, and the environment in which they operate.

Objective Setting
According to COSO (2004), objectives must exist before management can identify potential events affecting their achievement. Enterprise risk management ensures that management has in place a process to set objectives and that the chosen objectives support and align with the entity’s mission, vision and are consistent with its risk appetite.

Risk Identification
According to COSO (2004), internal and external events affecting achievement of an entity’s objectives must be identified, distinguishing between risks and opportunities. Opportunities are channelled back to management’s strategy or objective-setting processes.
Risk Assessment
According to COSO (2004), Risks are analysed, considering likelihood and impact, as a basis for determining how they should be managed. Risks are assessed on an inherent and a residual basis.

Risk Response
According to COSO (2004), management selects risk responses refers to risk avoiding, risk accepting, risk reducing, or sharing risk that is developing a set of actions to align risks with the entity’s risk tolerances and risk appetite.

Employee Involvement
According to COSO (2004), relevant information is identified, captured, and communicated in a form and timeframe that enable people to carry out their responsibilities. Effective communication also occurs in a broader sense, flowing down, across, and up the entity.

Monitoring and Control
According to COSO (2004), the entirety of enterprise risk management is monitored and modifications made as necessary. Monitoring is accomplished through ongoing management activities, separate evaluations, or both. Enterprise risk management is not strictly a serial process, where one component affects only the next. It is a multidirectional, iterative process in which almost any component can and does influence another. Moreover COSO (2004) describes that Policies and procedures are established and implemented to help ensure the risk responses are effectively carried out
The Risks Faced by Commercial Banks
According to Treasury (2004) , when discussing the challenges faced by Banking industry in managing risk, it is important to have a consistent definition of the term ‘risk’. For the purposes of this paper, risk refers to the uncertainty that surrounds future events and outcomes. It is the expression of the likelihood and impact of an event with the potential to influence the achievement of an organization’s objectives. In practice, banks’ exposures are asymmetric, this is particularly true for credit risk, where the upside consists of a small positive yield, and the downside consists of a loss that could range from zero to more than 100 per cent of the exposure. Given the Importance of this downside risk, banks tend to focus their energies on understanding and managing the key drivers that determine financial loss. In doing this, they generally distinguish between three main types of risk; namely credit risks, market risks and operational risks.

Credit Risks
According to Mgimwa et al (1995), credit risk arises from the potential that an obligor is either unwilling to perform on an obligation or its ability to perform such obligation is impaired resulting in economic loss to the bank. In a bank’s portfolio, losses stem from outright default due to inability or unwillingness of a customer or counter party to meet commitments in relation to lending, trading, settlement and other financial transactions.

Alternatively losses may result from reduction in portfolio value due to actual or perceived deterioration in credit quality. According to Choudhul et al (1998), credit risk emanates from a bank’s dealing with individuals, corporate, banking industry or a sovereign.

Market risks
According to Thomas (1997), market risk exposure may be explicit in portfolios of securities and equities and instruments that are actively traded. Conversely it may be implicit such as interest rate risk due to mismatch of loans and deposits. Besides, market risk may also arise from activities categorized as off-balance sheet item. Therefore, market risk is potential for loss resulting from adverse movement in market risk factors such as interest rates, forex rates, and equity and commodity prices.

Interest Rate Risks
According to Greuning et al (2009), the most common causes of interest rate risks is when there is a mismatch between positions, which are subject to interest rate adjustment within a specified period, moreover it can also occur because of bank’s lending, funding and investment activities give rise to interest rate risk. The immediate impact of variation in interest rate is on bank’s net interest income, while a long term impact is on bank’s net worth since the economic value of bank’s assets, liabilities and off-balance sheet exposures are affected Houpt et al, (1996) commented that when interest rates change, these differences can give rise to unexpected changes in the cash flows and earnings spread among assets, liabilities, and off-balance-sheet instruments of similar maturities or re pricing frequencies.

Foreign Exchange Risks
Bessis (2010) defines foreign exchange risk as incurring losses due to changes in exchange rates. Such loss of earnings may occur due to a mismatch between the value of assets and that of capital and liabilities denominated in foreign currencies or a mismatch between foreign receivables and foreign payables that are expressed in domestic currency. According to Greuning et al (2009), foreign exchange risk is speculative and can therefore result in a gain or a loss, depending on the direction of exchange rate shifts and whether a bank is net long or net short (surplus or deficit)in the foreign currency. In principle, the fluctuations in the value of domestic currency that create currency risk result from long-term macroeconomic factors such as changes in foreign and domestic interest rates and the volume and direction of a country’s trade and capital flows. Short term factors, such as expected or unexpected political events, changed expectations on the part of market participants, or speculation based currency trading may also give rise to foreign exchange changes. All these factors can affect the supply and demand for a currency and therefore the day-to-day movements of the exchange rate in currency markets. Foreign exchange risk is generally considered to comprise of transaction risk, economic risk and revaluation risk.

Equity Price Risks
Equity price risks are the earnings or capital that results from adverse changes in the value of equity related portfolios of a Banking industry. Price risk associated with equities could be systematic or unsystematic. The former refers to sensitivity of portfolio’s value to changes in overall level of equity prices, while the latter is associated with price volatility that is determined by firm specific characteristics. According to PricewaterhouseCoopers (1996) accurate and timely measurement of market risk is necessary for proper risk management and control. Market risk factors that affect the value of traded portfolios and the income stream or value of non-traded portfolio and other business activities should be identified and quantified using data that can be directly observed in markets or implied from observation or history.

Liquidity Risk
Greuning et al (2009), indicate that a bank faces liquidity risk when it does not have the ability to efficiently accommodate the redemption of deposits and other liabilities and to cover funding increases in the loan and investment portfolio. These authors go further to posit that a bank has adequate liquidity potential when it can obtain needed funds (by increasing liabilities, securitizing, or selling assets) promptly and at a reasonable cost. The Basel Committee on Bank Supervision, in its June 2008 consultative paper, defined liquidity as the ability of a bank to fund increases in assets and meet obligations as they become due, without incurring unacceptable losses.

Bessis (2010) however considers liquidity risk from three distinct situations. The first angle is where the bank has difficulties in raising funds at a reasonable cost due to conditions relating to transaction volumes, level of interest rates and their fluctuations and the difficulties in finding counterparty. The second angle looks at liquidity as a safety cushion which helps to gain time under difficult situations.

Operational Risk
The Basel Accord (2007) defines operational risk as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. Malfunctions of the information systems, reporting systems, internal monitoring rules and internal procedures designed to take timely corrective actions, or the compliance with the internal risk policy rules result in operational risks Bessis, (2010). Operational risks, therefore, appear at different levels, such as human errors, processes, and technical and information technology. Because operational risk is an event risk, in the absence of an efficient tracking and reporting of risks, some important risks will be ignored, there will be no trigger for corrective action and this can result in disastrous consequences.

Greuning et al (2009), believe that developments in modern banking environment, such as increased reliance on sophisticated technology, expanding retail operations, growing e-commerce, outsourcing of functions and activities, and greater use of structured finance (derivative) techniques that claim to reduce credit and market risk have contributed to higher levels of operational risk in banks
Compliance Risk
CRDB (2013) defines compliance risk as the risk that exposes the Bank to fines, civil money penalties, payment of damages, and the voiding of contracts. It is the current and prospective risk to earnings or capital arising from violations of, or noncompliance with, laws, regulations, internal policies and procedures, or ethical standards. Compliance risk also arises in situations where the laws or rules governing certain products or activities of the Bank’s clients may be ambiguous. The group has set policies governing the detection, prevention, monitoring and reporting of compliance risk for both regulatory and internal controls.

Strategic Risks
While financial risk and credit risk in banking have been rigorously explored, the risk management implications of many corporate strategies and the external market and industry uncertainties have received relatively little attention Miller,(1992), Slywotzky, et al (2005), define strategic risk as the array of external events and trends that can devastate a company’s growth trajectory and shareholder value. Whiles these two authors consider strategic risk as a sole consequence of external occurrences; other authors look at strategic risk as the current and prospective impact on earnings and/or capital arising from internal business activities such as adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes. They therefore consider strategic risk as a function of the compatibility of an organization’s strategic goals, the business strategies.

Formulating a risk Management Framework
According to Spinard, et al (2005), Risk management framework encompasses the scope of risks to be managed, the process and procedures to manage risk and the roles and responsibilities of individuals involved in risk management. The framework should be comprehensive enough to capture all risks a bank is exposed to and have flexibility to accommodate any change in business activities.

According to ISO 31000 (2009), a risk management framework is a set of components that support and sustain risk management throughout an organization. There are two types of components: foundations and organizational arrangements. Foundations include your risk management policy, objectives, mandate, and commitment. And, organizational arrangements include the plans, relationships, accountabilities, resources, processes, and activities you use to manage your organization’s risk.

COSO (2004): Integrated framework that helps businesses and other entities assess and enhance their internal control systems in banking. That framework has since been incorporated into policy, rule, and regulation, and used by thousands of enterprises to better control their activities in moving toward achievement of their established objectives. Recent years have seen heightened concern and focus on risk management, and it became increasingly clear that a need exists for a robust framework to effectively identify, assess, and manage risk.
This study suggests an effective risk management framework that reflects COSO (2004) structure as the researcher finds fit to the study as it is clearly defining risk management policies and procedures covering risk identification, acceptance, measurement, monitoring, reporting and control. A well constituted organizational structure defining clearly roles and responsibilities of individuals involved in risk taking as well as managing it. Banks, in addition to risk management functions for various risk categories may institute a setup that supervises overall risk management at the bank. Such a setup could be in the form of a separate department or bank’s Risk management Committee (RMC) could perform such function emphasizing more in organizations’ effective and efficient enterprise risk management.

Integration of Risk Management Framework
This study suggests that Risks must not be viewed and assessed in isolation, not only because a single transaction might have a number of risks but also one type of risk can trigger other risks. Since interaction of various risks could result in diminution or increase in risk, the risk management process should recognize and reflect risk interactions in all business activities as appropriate. According to Mangiero (2004), assessing and managing risk the management should have an overall view of risks the recent concept in this regard is Enterprise Risk Management (ERM) Introduction institution is exposed to. This requires having a structure in place to look at risk interrelationships across the organization
The Empirical Literature Review
Risk is not understood merely as “uncertainty about the future” or the “probability of sustaining a loss” but is defined as “an expression of the danger that the effective future outcome will deviate from the expected or planned outcome in a negative way Gergen, et al (2000). This section contains a number of selected empirical reviews related to the study.

Karaviti (2009), studied Risk management in banking industry in Greece, with a view to examine whether the risk management process is adopted and how is managed. The research design was exploratory that included a sample of 155 bank branches. The findings showed that risk management by the Greek banks is positively and significantly associated with the elimination of banking risks and the improvement of company’s revenues correspondingly. The study concluded that bankers must set aside the resources to acquire and use risk management weapon efficiently and effectively to compete in the globalizing economy. This study aimed to check whether risk management process is adopted by Greek banks and however the same study used exploratory study but the current study’ objective is to assess the risk management practices in commercial banks in Tanzania and the study uses cross section survey design .Then this research work will assess whether the same results will be obtained.

Rasid et al (2009) investigated management accounting and risk management practices in financial institutions in Malaysia using mail surveys. Questionnaires sent were 106 in financial institutions listed under Malaysian Central Bank, of this, 76 respondents or 68 percent responded. The study found that size was not related to the extent of risk management development and concluded that financial institutions tend to adopt risk management because of the requirements set by regulators. This study focused on the investigation of management accounting and risk management practices in financial institution in Malaysia using mail survey. however the current study’ objective is to assess the risk management practices in commercial banks in Tanzania and the study uses cross section survey design .This research work will therefore assess whether the same results will be obtained.

Fatemi, et al (2000), conducted a study on risk management within the banking organization in Asia. The objective of the study was to assess general risk management and internal control in relation to risk management function. Research design is Survey study. Sample size was 52 banks. Findings Thai banks face resource constraints in data for market risk measurement, while Indonesian banks face problems in availability of qualified staff in the area of operational risk. He then concluded that banks have sound practices in the areas of credit and market risk management, as well as internal control. The research’s objective is to assess general risk management and internal control in relation to risk management function in Asia. The research design used is survey study and the sample size is 52. But the current study’s objective is to assess risk management practice in commercial banks in Tanzania and the research design is cross section survey and the sample size is 80. The researcher will therefore assess whether same result will be obtained.

Gatzert (2013), studied the determinants and value of enterprise risk management factors drive the implementation of risk management system in companies and whether risk management programs can actually create value once implemented, the objective is to show how risk management creates value for shareholders and examine the practical issues that arise in the implementation of risk management. The research design is by conducting a comparative assessment; sample size is 35 companies in USA. The findings show that particularly the company size and the level of institutional ownership are significantly positively related to the implementation of risk management in most empirical studies. The study concluded that risk management generally has a significant positive impact on corporate value and performance.

The objective in this study is to show how risk management creates value for shareholders and examine the practical issues that arise in the implementation of risk management. The research design used is by conducting a comparative assessment and the sample size is 35. But the current study’s objective is to assess risk management practice in commercial banks in Tanzania and the research design is cross section survey and the sample size is 80. The researcher will therefore assess whether same result will be obtained.

Hoyt et al (2009).The value of risk management, the objective of this study is to measure the extent to which specific firms have implemented risk management programs and, then, to assess the value implications of these programs. Research design used is regression analysis sample size is 275 banks in USA. The finding of the study is positive relation between firm value and the use of Risk Management. The study concluded that risk management premium is statistically and economically significant and approximately 17 percent of firm value.

The objective of this study is to measure the extent to which specific firms have implemented risk management programs and, then, to assess the value implications of these programs. . The research’s design used is regression analysis and the sample size is 275 banks in USA. But the current study’s objective is to assess risk management in commercial banks in Tanzania, and the research design is cross section survey although regression analysis is run to show relationship between variables. The research therefore assesses if same result holds.

Conceptual Framework and Research model
This part provides explanation as to how and why variables understudy are interrelated and presents the framework model of the study.

Risk management practice and employees involvement
As Perotin et al, (2000) study recommended. Risks are most effectively identified when work activities are actually being designed, planned, talked about and decisions about the impact on health and safety can be made uncompromisingly. This means risk management must be: planned, systematic, done at the right time and comprehensive, to cover all potential hazards and risks. Consultation is a central feature of risk management because involving the people who do the work in identifying hazards and deciding how to control risks is the most effective way to manage workplace health and safety. These people know the job, know what is needed to make the job safe, know the production process, and above all know how best to solve problems so that hazards are eliminated or controlled.

The OHS Act (2000) requires employers to consult with employees and take into account their views when making decisions that affect their health, safety and welfare. Involving your employees in identifying hazards and solving health and safety problems is an essential step in making your workplace safe and healthy.

According to Sexton et al (1994), employee involvement is explained as regular participation of employees on deciding how their work is done, making suggestions for improvement, goal setting, planning, and monitoring of their performance. Encouragement to employee involvement is based on the thinking that people involved in a process know it best, and on the observation that involved employees are more motivated to improve their performance.

Risk Management practice and risk management policy
According to Baron et al (2009), enterprise risk management is a process, applied by our organization in a strategic setting, which enables management to identify potential risk events that may affect the entity; and provides a framework to manage risk within the organization’s risk appetite in order to provide reasonable assurance regarding the achievement of the organization’s objectives. Risk has been defined as anything that hinders the sustainable achievement of enterprise objectives and results, including failure to maximize opportunities
According to COSO (2004) enterprise risk management policy (the Policy) establishes the criteria within which enterprise risk management is managed. The intent of this Policy is to ensure the effective communication and management of risk across all risk categories including at an aggregated level. The policy is also intended to ensure that Enterprise maintains an effective distinction between those who establish risk policy, processes (i.e., assessment) and methodologies (i.e., monitoring and reporting) those involved in taking and managing risk and those who provide assurance that all significant risks are appropriately identified, assessed, managed, monitored and reported.

The scope of the Policy is enterprise-wide and is applicable to Board, Management and employees of the Enterprise.

Risk Management Practice and Profitability
According to Armstrong et al (2009), banking Profitability may also reflect the risk taking behavior of managers. Banks with high profitability are less pressured to revenue creation and thus less constrained to engage in risk credit offerings. At the same time, inefficient banks are more likely to experience high level of problem loans. Poor management can imply weak monitoring for both operating costs and credit quality of customers, which will include high levels of capital losses. Under this “bad management” hypothesis advances by Berger et al (1995), mangers lack competencies to effectively assess and control risks incurred when lending to new customers. Godlewski (2004) is using the adjusted ROA as a proxy for performance, shows that banks profitability negatively impacts the level of nonperforming loans ratio.

Garciya-Marco et al (2007) found that profit maximizing policies will be accompanied by higher level of risk. The acceptance and management of financial risk is inherent to the business of banking and banks? roles as financial intermediaries. Risk management as commonly perceived does not mean minimizing risk; rather the goal of risk management is to optimize risk-reward trade-off. Notwithstanding the fact that banks are in the business of taking risk, it should be recognized that an institution need not engage in business in a manner that unnecessarily imposes risk upon it: nor it should absorb risk that can be transferred to other participants. Rather it should accept those risks that are uniquely part of the array of bank’s services. An important aspect regarding various risk categories is their correlation. On the other hand tightening of the risk management process and arrange appropriate monitoring procedure for financing against high risk securities and projects.

Risk Management Practice and Management Practice
According to Lewis et al (2006) management practice comprises of three different conceptions which are as follows; a collection of typical human resource department practices, the flow of human resources throughout the organization; and sourcing, developing and rewarding employee. Management practice starts with recruitment process, alignment of the workforce to the organization, develop the people and get constant feedback to help in performance of an individual or an organization. The practices adopted generally differ from industry to industry in many cases and certain practices are more suitable for certain industries over others. At the same time there are some practices which are prevalent in most of the industries.

Research model
There are number of variables that have been shown by various scholars for the effectiveness of the risk management practices in banking industry. This study is basically concentrated on a few of them; Employee involvement, sustainability of profit, risk management policy and management practice.
From literature review, it has been identified that, Employee involvement, risk management policy and management practice have significant positive effect on effective risk management practices in commercial banks. Satta (2003), COSO (2004), ISO 31000 (2009), Mourdoukoutas (2001), Milton (2000). However other studies have identified that risk management practices have no significant effect on the sustainability of profit, Montagno et al (1993), Hants (1993). Muelbroek (2002) .The aforementioned scholars their findings were based in countries outside Tanzania. Based on these findings, the proposed study aimed at investigating the effectiveness of risk management practices in the banking industry in Tanzania. The relationships among variables of the study are presented here below;

Figure 2.1:Risks Management Framework model
Internal environment:

Includes organization philosophy,
Ethical value, risks appetite

Objective setting:
Includes organization mission, vision
and objectives

Risk identification:

Includes identifiable opportunities,
Internal and external events

Risk assessment
:
Includes risks rating, likelihood &
impacts

Risk response
:

Risks avoidance, accepting, sharing,
transferring & risks response

Source:
Modified COSO Framework, 2004

RISK
MANAGEMENT
PRACTICES
Employee Involvement and Communication:
Includes,
identifying and capturing information, and time frame

Risk Monitoring and Control:

Includes risks evaluation,
policy and procedures

Figure 2.1:Risks Management Framework model
Internal environment:

Includes organization philosophy,
Ethical value, risks appetite

Objective setting:
Includes organization mission, vision
and objectives

Risk identification:

Includes identifiable opportunities,
Internal and external events

Risk assessment
:
Includes risks rating, likelihood &
impacts

Risk response
:

Risks avoidance, accepting, sharing,
transferring & risks response

Source:
Modified COSO Framework, 2004

RISK
MANAGEMENT
PRACTICES
Employee Involvement and Communication:
Includes,
identifying and capturing information, and time frame

Risk Monitoring and Control:

Includes risks evaluation,
policy and procedures

For this study report, the research developed an Integrated Framework and model that expand on internal control, providing a more robust and extensive focus on the broader subject of risk management. While it is not intended to and does not replace the internal control framework, but rather incorporates the internal control framework within it, banks may decide to look to this risk management framework both to satisfy their internal control needs and to move toward a fuller risk management process to attain their aligned objectives. Enterprise risk management is not strictly a serial process, where one component affects only the next. It is a multidirectional, iterative process in which almost any component can and does influence another.

CHAPTER THREE
RESEARCH METHODOLOGY
This chapter describes the research methods that were used by the researcher in this study. Kothari (2004) defines research methodology as a systematic way applied to solve the research problem, it describe more about the area of study, the sampling population and sampling techniques as well as data collection tools that was used, the study has presented the analysis techniques that was used in the analysis of the study findings, and lastly the validity and reliability of the data.

Research Design
The research design adopted in this study was a cross sectional survey due to its ability to explain the prevailing conditions as perceived by the respondents and the studies are carried out once at a particular point in time, are present oriented and not repetitive in nature Kothari, (2004). Also, the researcher has no control over the subject and it is possible to obtain information on variables in different contexts at the same time. A cross sectional survey design is a snapshot of an ongoing situation provides external validity of the results so that the findings can be effectively generalized. It allows the possibility to collect data from a sizeable population using standardized instruments and control over the research process Mutai, (2000). The strength behind a cross-sectional survey approach over other designs lies on the premise that different groups of people.

As a positivistic deductive approach, the design seeks the causes of a social phenomenon with little regard for the subjective state of an individual Jill et al (1997). Thus, logical reasoning is applied to the research study so that objectivity and precision replace experience and intuition as means of investigating a research problem. Since cross sectional survey allows different analytical techniques, the study was guided by descriptive research techniques which according to Churchill (1979) are concerned with either determining the frequency with which something occurs or relationship between variables. The descriptive research technique enables the study in collecting both qualitative and quantitative data through open-ended and closed-ended questions. Major focuses of this approach was to assess on different management practices that are used in managing risks in Banking Industry.

Study area
This study focused on six commercial banks based in Dar es salaam city. The study covered the scope on commercial banks, since the level and extent of risks occurrence is high, and therefore it was evident that, the risks management practices are carried out by most commercial banks. Nevertheless, choosing Dar es salaam City as the study area helped the researcher to get ample time in collecting data being employees within the study area. It gave him more chances of conducting interview and access documentary review on issues related to the findings.

Study Population
According to Adam (2008) a population in research is the totality of the objects under investigation while a sample is a part of the population. Saunders et al. (2007) suggests that population is the complete set of cases or group members while a sample are a subgroup or part of a larger population. In this study the research used one hundred and seventy (170) staff from Bank A, Bank B, Bank C, Bank D, Bank E and Bank F to present the study population, of which only 100 staff were sampled. The information was gathered as individual respondent, focus-group discussion and interview from the commercial banks in Dar es salaam city.

The research Variables and Their Operationalization
This section presents both independent and dependent variables. The Independent variables for this study are risk management policy, management practice, profitability and Employee involvement, while the main focus of this study is to assess the risk management practices used by commercial banks. That being the case the dependent variable to this study is risk management practices. The variable definitions and their measurement are presented in the table below;
Table 3.1: Definition of variables and their measurement
Variable Definition and Measurement of the Variable

Risk management practice Risk management as a process, affected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
Risk management practice in banking is commonly measured by using Market risks, Interest Rate Risks, Foreign Exchange Risks, Equity Price Risk, Operational risk and Liquidity risk.

Risk management policy Risk management Policy as a document containing procedures, processes and techniques for handling various risks that has also been approved by the board. Risk management policy is commonly measured by using risk assessment and measures to control those risks.

Management practice

Management practice defined as methods or techniques found to be the most effective and practical means in achieving an objective (such as preventing or minimizing pollution) while making the optimum use of the firm’s resources.
Management practice is commonly measured by using the revenue generation, successful outreach, mission fulfilment and employee involvement and satisfaction

Profitability Profitability means the state or condition of yielding a financial profit or gain. It is often measured by price to earnings ratio.
Profitability is commonly measured by using the income and expenditure.
Employees Involvement Employee involvement is commonly measured by using (1)deciding how their work is done,(2)making suggestions for improvement, (3)goal setting, (4)planning, and (5)monitoring of their performance. Encouragement to employee involvement is based on the thinking that people involved in a process know it best, and on the observation that involved employees are more motivated to improve their performance.
Source: Research Own Construct, 2018
Sample size
The study was conducted in four commercial banks in Dar es salaam city. A sample of 100 respondents was obtained according to Morgan’s et al (1970) guidelines on how to choose a sample as cited by Sekaran (2003). The categories and size of the respondents that took part in the study are here presented in Table 3.2

Table 3.2: Sample selection and categories of respondent involved
Categories Number Sample
EXIM Bank 28 18 BARCLAYS Bank 26 17
DTB Bank 25 15
NMB Bank 37 20
CRDB Bank 29 15
NBC Bank 25 15
Total 170 100
Source: Researcher Own Construct, 2018
In the study, a total of 100 questionnaires were distributed. A total of 80 (80%) respondents’ fully completed questionnaires were returned and filled respectively.

Sampling techniques
This study used both purposive and stratified sampling techniques in gathering information. Purposive sampling was employed used in sampling officers; Directors, Managers and Line Managers. In the context of this study, the researcher also used stratified sampling in selecting respondents from a list of commercial banks in Dar es salaam city. The detail of sampling technique is as described in Table below;
Table.3.3: Sampling Distribution Table
Category Sampled Questionnaire administered Questionnaire received Sampling techniques
Directors/Managers/line managers 30 20 Purposive-sampling
Staffs/Employees working in Banks 70 60 Stratified-sampling
Total 100 80
Source: Researcher Own Construct, 2018
Types and Sources of Data
In this study both primary and secondary data and information was used. Primary data was collected from the field whereas secondary data was obtained from documentation which was available from libraries, references from internet.

Primary Data
According to Kothari (2004) primary data are those which are collected afresh and for the first time and thus happen to be original in character. These data was collected from the field, the researcher gathered field data from 80 respondents staffs of six listed commercial banks.

Secondary Data
Naoum (1998:17-27, 37-90) and Kombo and Tromp (2006:99), defined secondary data as review of published data and information from articles, reports, periodicals, indexes, bibliographies, abstracting periodicals, reviews, summaries and citation of other work, monographs. This secondary data was collected from library books, journals, articles and reports of published and unpublished documents were also used.

Data Collections Tools
According to Kothari (2004) primary data are those which are collected afresh and for the first time and thus happen to be original in character and secondary data are those which have already been collected by someone else and which have already been passed through the statistical process. The research use three techniques in primary data collection; namely: observation, interviews and questionnaires.

Questionnaire
Gergen, et al (2000). Defines questionnaires, as a form or a set of forms consisting of a number of printed or typed questions. Questionnaires containing both open- ended and closed-ended questions (to increase validity) will be self- administered to the respondents. The questionnaire was used in gathering quantitative and qualitative information from respondent. The research influenced to use questionnaire since the population was representative and free from biasness, and similarly respondents were free to give their personal opinion and comments to the open-ended questions. Likewise it helped in covering a large area within limited time.

Interview
This method of data collection is two way systematic conversations between the investigator and the interviewee Krinshnaswami, (1999). The interviews allow the researcher to clarify ambiguous answers and when appropriate, seek follow-up information. In this study interview was used to investigate details information several techniques used by enterprises in the formal sector in risks management. The anonymity and privacy of research was respected and personal information relating to participants was also kept confidential and secured.

The researcher tallied scores and tabulated all the responses against the provided interview questions. Moreover, the interview questions were structured in such a way that the interview would not deviate from the topic during the interview process. Furthermore, the interviewer attempted to be as objective as possible and avoided any comment that could bias the interviewer opinions.

Documentary Review
Bell (1993), defines documents as any written or recorded material, the preparation of which is not evaluation purposes or the request of the inquiry. Documentary review helps the researcher to collect data from several and multiple sources. The study obtained documentary data from published and unpublished documents. In this study, the documents which were used include; annual reports from selected commercial banks, policies and risk guides.

Observation
According Cohen et al. (2000), observation is used during data collection because it gives an opportunity to gather live data from live situation. The employees in all departments were observed while doing their work. This helped the researcher to validate information that was obtained through questionnaires and interviews. Through observation, the researcher was able to note employee’s general awareness on risk issues.

Data Analysis and Interpretation
Data was collected mainly by use of quantitative methods. Preliminary Data from questionnaires was compiled, sorted, edited, classified and coded into a coding sheet and analysed using a computerized data analysis package. Data from the open ended questions were analysed by indicating the magnitude of responses. Expressions like the bigger number, the least number to a large extent, to a small extent, most respondents? comments and the majority of respondents were applied. In some cases respondents? comments were directly quoted. The demographic characteristic illustrates the distribution of respondents? categories in relation to Age, Gender, and work experience in banking industry.

Descriptive data that is, Descriptions of respondents? opinions per the items of the questionnaire relating to the objectives of the study were presented. Respondents were requested to react to the items by ticking (checking) the option that best described their opinions on a Likert scale ranging from Strongly Disagree to Strongly Agree or Available, Not sure and Fairly available. The responses from the structured questions were computed into frequency counts and percentages and charts. The findings were summarized and tabulated for easy presentation, assessment, analysis and interpretation.
Conversely, with inferential statistics to obtain findings results, composite indices for the independent and dependent variables were computed by summing up all valid responses intended to obtain respondents? opinions per each of the five variables (i.e. Risk management practices, Risk management policy, Employees involvement, management practice and profitability).Thus, the categorical data were transformed into quantitative forms. In view of this, Extreme positive responses (i.e. strongly Agree, Very good) were assigned the value of five (5) and the extreme negative responses (i.e. Strongly Disagree, very poor) were assigned the value of one (1). Composite scores were computed for the independent and the dependent variables for statements of the questionnaire dealing with each of the four independent variables and the dependent variable. Consequently, the analysis entailed the verification of 0.05 level of significance. In verifying the findings, the study used the regression analysis method to establish whether risk management practice in banks is affected with each of the four independent variables
Reliability and Validity of Data
Reliability
According to Kothari (2004), the reliability of measuring instrument is defined as the ability of the instrument to measure what is supposed to measure. A measuring instrument is reliable if it provides consistent results. For this case the information collected from different sources were guided by the researcher when drawing up the conclusion of the study. To ensure the reliability of data, the researcher used test-retest method in which the same questions were posed twice on the same day to the respondents and the results compared.

Validity
According to Saunders et al (2007), validity implies what one wants to obtain and what one is supposed to measure. If one is able to get what was ended of the study, then the validity of information will have been attained. For validation purposes, the researcher used content validity for which the questions were based only on the specific research objectives of this study.

CHAPTER FOUR
PRESENTATION OF FINDINGS
This chapter presents the research finding. The study aims to examine the risk management practices and their impacts to the banks. The presentation of study findings is arranged base on research questions.
Demographic Findings from Commercial Banks
Commercial banks like other financial institutions have been encountering dramatic losses in their banking operations. Most of these losses lead to poor performance which is largely associated with exposure to risky events. As outlined in the study findings below, this risk is a result of a number of factors. Table 4.1 represents research findings in gender, job experience and level of education of the sampled staff. The findings in Table 4. 1 indicates that 62.5% of the respondents were male, while 37.5% were female.

Table 4.1 Banking Staffs Gender-categories Attributes Freq %
Female 30 37.5
Male 50 62.5
Total 80 100
Source: Survey Data, 2018
The results findings in Figure 4.1 indicate banking staff’s job experience. We asked this question because we wanted to know how experienced the respondents were in managing risk. The findings show that, 47% of the staff had more than six (6) years job experience, 35% had job experience of between 4 to 6 years, 10% had less than one year job experience and 8% had job experience of 1 to 3 years within their respective organization.
Figure 4.1 Bankers Job Experience

10
%
%
8
35
%

%
47
Less than one year
1-
3 years

4-6
years

More than 6 years
Figure 4.1 Bankers Job Experience

10
%
%
8
35
%

%
47
Less than one year
1-
3 years

4-6
years

More than 6 years

Source: Survey Data, 2018
The finding in Table 4.2 indicate that 60% (24 staffs) of the staff had first degree, 20% had advance diploma, 15% had master’s degree and only 5% had ordinary diploma.

Table 4.2 Banking Staff Level of Education Attributes Freq %

Master’s degree 12 15
First degree 48 60
Advance diploma 16 20
Diploma 4 5
Total 80 100
Source: Data analysis, 2018
The results in Table 4.2 show that about 75% of bank staff had a minimum of university degree, while 25% of the staff had diploma. It can be revealed that staff had enough qualification in terms of academic qualification, they were therefore able to identify types of risks, their causes and impacts, and possible how this risks are management.
Awareness of Banking Risk
This section has addressed level of awareness on risks management in commercial banks. The study aimed at examining if staffs were aware of bank specific risks? and in some cases what are the causes.
Level of Awareness of Banking Risks
The findings in Table 4.3 indicate the level of awareness on banking risks. Findings has revealed that 62.5% of the sampled staff were fully aware of all banking risk, 35.00 % were somehow aware, while on the other hand 2.5% of the staff did not respond. Likewise the same table indicates that 50% of the banking staff who were aware of banking risks mentioned them to include compliance, liquidity, and credit and operation risk.
Table 4.3 Staffs awareness on banking risks
Attributes Freq %
Table 4.3 Staffs awareness on banking risks
Attributes Freq %

Fully aware 50 62.5
Somehow 28 35.00
Did not respond 2 2.5
Total
80
100

Total
80
100

Source: Data analysis, 2018
Notwithstanding, the study findings in Table 4.4 show that, 35% of the staff had awareness of operational, strategic and credit risk, 10% said they know credit, liquidity and reputation risks while 15% of the staff said reputational, strategic and credit risk. Generally, the study shows that the common types of risks that are experienced within the bank are operational, credit, liquidity and compliance risk, since they were mentioned by majority of the sampled population.

Table 4.4 Types of Risks Associated with Banking
Attribute Freq %
Compliance, liquidity and credit 14 35
Credit, liquidity and reputation risk 4 10
Legal, credit, operational and compliance 16 40
Reputational, strategic and credit 6 15
Total 80 100
Source: Data analysis, 2018
The study findings show that majorities (74%) of the respondent were aware of banking, risks, as only 23% of the respondent who said they are not aware.
Awareness in relation to Banking Specific Risks
The findings in Table 4.5 indicate the extent of awareness on banking specific risks. Study findings show that 25.1% who agreed that it was high extent, 38.8% who said low extent. Findings revealed that 71.3% who said they were aware to a low extent they were aware of banking risk management. On the other hand 3.8% not aware, unlike 3.8% who said they are not aware all.
Table 4.5 Extents of Aware on Banking Specific Risks?
Attributes Frequency Percent
Very high extent 7 8.8
High extent 13 16.3
Low extent 31 38.8
Very Low extent 26 32.5
Not aware at all 3 3.8
Total 80 100
Source: Data analysis, 2018
The findings in Table 4.6 indicate the extent to which the risks outlined in the table are relevant to commercial banks. Interestingly, the findings indicated that, credit related risks are more pronounced. Out of 80 respondents 53(66.3%) said it was relevant, this was then followed by marketing risk with 44(53.8%) that said it was relevant. Furthermore studies also indicate that liquidity and interest rate risk are also pronounced with 35(43.8%) and 32(40%) relevancy respectively. The risks which are moderately felt are operation risks (54.7%), foreign exchange risk (38.8%) and equity price risk (36.3%). The study further observed that legal risk, compliance risk and strategic risk are categories of risks which are less relevant with 47.5%, 45% and 42.5% less relevant.

Table 4.6 Extent that the following risks are specifically relevant to your organization?
Attribute Very relevant Relevant Moderate Less Relevant Not Aware
Legal Risk 2 9 29 38 9
Market Risk 19 25 14 19 12
Operational Risk 3 11 35 18 13
Credit Risk 31 22 11 9 7
Liquidity Risk 18 17 22 11 9
Equity Price Risk 3 8 29 28 22
Foreign Exchange Risk 4 9 31 27 9
Interest Rate Risk 9 23 21 19 21
Strategic Risk 6 5 27 34 21
Compliance Risk 4 7 18 36 11
Source: Data analysis, 2018
Causes of Banking Specific Risk
The study findings in Table 4.7 indicate responses from respondents(staff)about the main causes of liquidity and compliance risk; the following were the responses,20% of the respondent who said it is because of lack of enough customers financial information and records is a contributing factor for liquidity and compliance risks,30% had their opinion that poor financial appraisal, is that one cause over or under financing by the bank to shareholders,15% of the staff indicated that poor documentation of security results in insecurity in financing banking operations.

Furthermore, the findings indicate that 35% of the respondent who said poor administration, control and monitoring of banking operation cause slackness in following up bank business, 10% who said that it is due to fraudulent and negligent acts among banker’s and collusion with customers, hence scarcity of supervisory field staff and lastly 15% of the sampled staff indicated that poor financial information, appraisal and lack of proper risk-portfolio management.
Table 4.7 Causes of Banking Specific Risks
Attributes Freq %
lack of enough customers financial information and records 16 20
poor financial appraisal, that cause over/under financing by the bank to shareholders 24 30
poor administration, control and monitoring of banking operation 28 35
fraudulent and negligent acts among banker’s and collusion with customers 8 10
poor financial information, appraisal and lack of proper risk-portfolio management 12 15
Total 80 100
Source: Data analysis, 2018
Risks Rating in Commercial Banks
This section has outlined the risks rating and monitoring practices in commercial banks. The study observed.

Risks Rating and Monitoring Process
The study findings in table 4.8 examined the type of risk rating process taken to monitor risk occurrence in banking. Concerning the extent of risk rating process, 46.3% said it was strong, 38.8% said it was fair while 11.3% said it was weak. Regarding the extent of risks monitoring process, 41.3% who said it was strong, 30% said it was fair, while 28.8% indicated that it is weak. Table 4.8 shows the result of analysis of the level of involvement of staff in risks monitoring process. As it can be seen 47.5% who said it is strong, 38.8% said it was fair, 26.3% said they are weak.

Table 4.8 Risk rating process taken to monitor risks occurrence in banking
Attribute Very strong Strong Fairly Weak Very weak
Extent of risk rating process? 9 28 31 9 3
Extent of risks monitoring process? 6 27 24 13 10
Level of involvement of staffs in risks monitoring process? 15 23 31 15 6
Level of commitment by staffs in risks monitoring? 7 21 38 9 5
Level of management support in risks management process? 3 18 29 21 9
Source: Data analysis, 2018
Regarding level of commitment by staff in risks monitoring, findings show that 35% said staff are strongly committed while 47.5 said they are fairly committed, contrary 17.5% said they are weakly committed. Moreover, regarding level of management support in risk management process, findings has revealed that, 26.3% said support strong, 36.3% said support is fair, while 37.5% said support is weak
Risks Rating in Commercial Banks
Table 4.9 shows the results of analysis of responses to the question regarding the techniques used in rating risks by commercial banks.

Table 4.9 Techniques commonly used in rating risk
Attribute Very strongly Strongly Fairly Minimum
Freq % Freq % Freq % Freq %
Matrix toolkit and bank information 58 72.5 14 17.5 6 7.5 2 2.5
Risk-adjusted return on capital 4 5 18 22.5 44 55 14 17.5
Timelines, vale-at-risk & scope 32 40 30 37.5 6 7.5 2 2.5
Risk metrics, credit scoring & rating 36 45 10 12.5 28 35 6 7.5
Total 162.5 90 105 30
Source: Data analysis, 2018
The results reported indicate that the most common technique used in rating risks are timeliness, vale-at-risk and scope of operation is the common tool used in measuring or rating liquidity risk, moreover the finding show that Matrix toolkit and bank information was used to measure compliance and market situation, the study also mentioned other techniques that are not common but they are used in measuring banking risk to include return on capital and economic value. Further analysis shows that risk metrics, credit scoring and rating are the tools which are commonly used in measuring credit risks.

Obstacles for Risks Rating Process
Table 4.10 shows that the results of analysis of the obstacles hindering risk rating and measuring. The table shows that 50% of the respondents felt that lack of systematic information regarding risk was the major obstacles, 17.5% showed that poor knowledge of risk and risks management process was the major hindrance.

Table 4.10 Obstacles Hindering Risk Rating Process

Attributes Freq %
Lack of systematic information regarding risk 40 50
Poor knowledge of risk and risks management process 14 17.5
Lack of risk-rating experts and professionals 6 7.5
Diverse banking environment and competitions 2 2.5
Inter-banking transaction and associated technology 18 22.5
Total 80 100
Source: Data analysis, 2018
The finding further show that 7.5% of the respondents agreed that lack of risk-rating experts and professionals is the main hindrance. Moreover, the study indicates that 2.5% of the respondents said that diverse banking environment and competitions are the major constraints while 22.5% of the respondent said that increased inter-banking transaction and associated technology are probably the major set-back.

Risks Management Practices
Staff Involvement and Management Commitment on Risks Management
The study findings in Table 4.11, employee’s involvement in risk management practices in your organization. The findings in Table 4.5 examined the extent of awareness on banking specific risks. Study findings show that 7.5% agreed that they are very highly involved, 16.3% said highly involved. Findings have revealed that 36.3% said they are lower involved in the risks management practices within the bank. On the other hand 6.2% said they are not aware at all.

Table 4.11 Staff involvement in risk management practices in your Organization?
Attributes Freq %
Very high involved 6 7.5
Highly involved 13 16.3
Low involved 29 36.3
Very Low involved 27 33.8
Not involved at all 5 6.2
Total 80 100
Source: Data analysis, 2018
The findings in Table 4.12 assessed if technical procedures and practices are actually being used by the bank. Study findings examined on how risk transferring to other participants, results has indicated that 63.8% agreed that technical procedures and practices are actually being used. On the other hand 45% disagreed while 10% were not sure. The same table examined how risks elimination or avoided by business practice.
Table 4.12: Technical Procedures and Practices used by the bank
Attributes Strongly
Agree Agree Disagree Completely
Disagree Not sure
Risk Transferring to other participants 13 38 29 7 8
Risk elimination or avoided by business practice 7 31 27 10 5
Risk actively managed at the firm level 14 41 13 9 3
Source: Data analysis, 2018
The findings show that, 47.5% who agreed that technical procedures practices are being used by banks in risk management processes. Moreover, 46.3% who disagreed with the statement that risk elimination or avoided business practice are not actually used in risk management, nevertheless 6.3% who respondent that, they are not sure. In regards to the questions that asked, if risks are actively managed at the firm level, findings revealed that 68.8% agreed, 26.3% who disagreed while 3.8% said they are not sure. The study findings in Table 4.13, examined if risks management practices or procedures are followed and observed in your bank. Finding show that, 48.8% agreed while 36.3% disagreed with the statement which was assessing if risks management practices and or procedures are followed and observed in the bank. Notwithstanding this, 6.3% said they are not sure.
Table 4.13: If Risks Management practices/procedures are followed and observed in your bank
Attributes Freq %
Strongly agree 12 15
Agree 27 33.8
Disagree 16 20
Strongly disagree 13 16.3
Not sure 5 6.3
Total 80 100
Source: Data analysis, 2018
Findings in Table 4.14 explained the question as the researcher wanted to know whether risk management practices performed by commercial banks confirms with risk management policies. In responding to the question 23.75% conformed very high, 41.25% expressed they knowledge highly conformed, whereby 20% concluded Low conformity, 6.25% stated that the range is at a very low conformity and 8.75% were not aware at all. The findings meet requirements of COSO (2004) Framework.
Table 4.14 Conformity of Risk Management practices to the Risk Management Policy
Attributes Freq %
Confirm very high 19 23.75
Highly confirm 33 41.25
Lowly confirm 16 20
Very Low confirm 5 6.25
Not aware at all 7 8.75
TOTAL 80 100
Source: Data analysis, 2018
Consistency of Risks Management Practices
The study’s finding in Table 4.15 was responding to the question which was examining the extent to which commercial banks do comply with risk management procedures. The results show that 42.5% of the respondents said that the bank do highly maintain compliance with risks management, 35% said the bank has a slight risk compliance, 20% said that it is very weak and 2.5% did not respond. It can be seen that the bank has put forward several measures to avoid or reduce risk in its operation. However, it may be difficult to overcome all risk scenarios, unless much effort is in place to prevent them from occurring.
Table 4.15 Level of consistent with risk management practices
18-45457Attributes Freq %
Highly maintained 34 42.5
Slightly maintained 28 35
Very weak 16 20
Others(specify) 2 2.5
Total 80 100
Source: Data analysis, 2018
Effectiveness in Communicating Risks Management Measures
The study findings in Figure 4.2, was examining if the organizations effectively communicate in order to reduce risk. In this question, the respondents could choose more than one answer. The results show that the most common way of communicating effectively to reduce risk is developing understanding between management team and employee, with 73.50% of the respondents picking this answer. It means that most of the respondents think that developing this understanding is a first priority for organizations. The next results were equal between creating clear and trustworthy information and regularly communicating among management, both with 67.60%. Creating and maintaining a clear communication followed with 58.80%. The lowest ranking was fast and sharp communication between management team and stakeholder, with 47.10%.
Figure 4.2: How effectively Organization Communicate to reduce risks
73.5
67.6
58.8
47.1
0
20
40
60
80
Line 1
47.1
73.5
67.6
58.8
Developing
creating &
Promoting sharp
creating trustworthy
73.5
67.6
58.8
47.1
0
20
40
60
80
Line 1
47.1
73.5
67.6
58.8
Developing
creating &
Promoting sharp
creating trustworthy

Source: Data analysis, 2018
This means that fast and sharp communication between management team and stakeholder is not a common way of communicating to reduce risk and is outranked by creating understandable and clear information. Furthermore, the respondents were asked to give the percentage of guidelines that support the goals and objectives of risk management. Results findings from the staff show that 97.1% of respondents have guidelines that support the goals and objectives of risk management. But 2.9% do not have a guideline to support the goals and objectives of risk management. The findings meet the requirement of COSO (2004) Framework.
Significance of Risks Management
The results findings in Figure 4.3 indicate the expectations in risk management in their organization in relation to sustainability of profit. We asked this in order to find out how important the respondents think risk management is. The results show that most of the respondents expect risk management to reduce financial losses (91.20%). Additionally, 82.40% of the respondents expect effective risk management to improve decision making and 38.20% expect effective risk management to improve communication with the stakeholders and improve resource allocation.
Figure 4.3 Significance of risks management in commercial banks
0
20
40
60
80
100
Reduce financial losses
91.2
82.4
38.2
Reduce financial
losses
Improve decision
making
Improve resource
allocation
Source:
Data analysis, 2018
0
20
40
60
80
100
Reduce financial losses
91.2
82.4
38.2
Reduce financial
losses
Improve decision
making
Improve resource
allocation
Source:
Data analysis, 2018

Risk Management Procedures and Policy
Procedures used in Risks Mitigation
The study finding in Table 4.14, was responding to the question which examined the procedure used by the bank to overcome banking risks. The finding show that 25% of the respondents said risk reduction is done through training staff on safety, quality control and hazard education, 27.5% actively observing banking policies and procedures,7.5% of the respondents said risk is reduced by actively observing banking policies and procedures.

Table 4.16 Procedures used in Mitigating Banking Risks
Freq %
Done by training staffs on safety, quality control and hazard education 10 25
Actively observing banking policies and procedures 11 27.5
Using alternative risk financing i.e. self-insurance and captive insurance 3 7.5
Measuring and monitoring of banking operation 1 2.5
Establishing a management information system for risk 6 15
Improving relationship with shareholders and good publicity 4 10
Total 80 100
Source: Data analysis, 2018
The research findings also indicate that 7.5% of the respondents said risk is avoided by using alternative risk financing i.e. self-insurance and captive insurance, 2.5% of the respondent who said measuring and monitoring of banking operation which means ensuring adequate controls over risk. Moreover, the table indicates that 15% of the respondents said risks is reduced by establishing a management information system that complies with banking policies and procedures while 10% of the respondents said that, risk is reduced by improving relationship with shareholders and good publicity.

Procedures used in Mitigating Credit Risk
The study finding in Table 4.15 was responding to the question which was examining strategies used by management in reducing credit risks; the following were the responses from the staff, 20% said first the bankers have to contact and interview the clients, followed by loan vetting. Further scrutiny done by bank credit committees 25% indicated that gathering and vetting all necessary information from customers is the main procedure.
Table 4.17: Strategies used by Commercial Banks in Overcoming Credit risk
Attributes Freq %
Contacting and interviewing customers before issuing loan form 16 20
Gathering and vetting all necessary information from customer’s 20 25
Conducted interview with credit applicant basing on bank’s credit manual 16 20
The information is sent to credit central committee for final decision 4 5
All credit policies are done to ensure that credit and market risk are done 24 30
Total 80 100
Source: Data analysis, 2018
Findings in Table 4.17 also shows that 20% they conducted interview with credit applicant basing on bank’s credit manual, moreover 5% indicated that the information is sent to credit central committee for final decision and lastly 20% said contacting and interviewing customers before issuing loan form. Moreover, 30% of the respondents said that all of the banking credit policies are for ensuring that credit and market risk is properly handled.

Management commitment on Risks Management
In Figure 4.4, asked the respondents about how their organization supports risk management Policy. In this question, the respondent was able to choose more than one answer. The results of this question were that most of the respondents’ organizations set up risk management teams (67.60%) while 55.90% clearly allocate risk management responsibilities, 52.90% regularly revise risk management plans, 41.20% strictly obey risk management policy, 32.40% listen to problems from employees, and 29.40% allocate resources.
Figure 4.4: How Management Support Risks management
67.6
55.9
52.9
41.2
32.4
29.4
0
20
40
60
80
Line 1
67.6
55.9
52.9
41.2
32.4
29.4
Set-up risks
Allocate risks
Regularly
Strickly obey

Listern to
Allocate

67.6
55.9
52.9
41.2
32.4
29.4
0
20
40
60
80
Line 1
67.6
55.9
52.9
41.2
32.4
29.4
Set-up risks
Allocate risks
Regularly
Strickly obey

Listern to
Allocate

Source: Data analysis, 2018
They have a policy to support the development of risk management. The researcher conducted interview with respondents by asking them to reply a yes/no to question that asked the respondents about future risk management policy. The results show that the amount of respondents who chose yes was 97.10%, which means that top management is willing to support the development of future risk management policy.

Development of Risk Management Procedures
The results in Figure 4.5, examined on who has the authority to establish risk management in their organization. The results of this question were closely expected because we assumed the top-level should have the authority to establish risk management. As we can see in the bar chart, the majority of the respondents (41.20%) specify that the board and committee have the authority to establish risk management. Next was the executive management team (35.30%), Chief Executive Officer (CEO) with 14.70% and Chief Financial Officer (CFO), internal auditor and staff with 2.90%.
Figure 4.5: Parts Involved in establishing Risks Management Policy
0
20
40
60
East
2.9
41.2
35.3
14.7
Board &
Executive
Chief Financial
Chief Executive
0
20
40
60
East
2.9
41.2
35.3
14.7
Board &
Executive
Chief Financial
Chief Executive

Source: Data analysis, 2018
Awareness of Risks Management Guidelines
The findings in Figure 4.6 were meant to know, the percentage of the extent of understanding about the risk management guideline or policy. Results revealed that 94.1% of respondents understood the risk management guideline or policy. But 5.9% did not understand the risk management guideline or policy.
Figure 4.6: Level of Awareness on Risks Management Guidelines
94
%
6
%
Understand
Don’t understand
Source:
Data analysis, 2018

94
%
6
%
Understand
Don’t understand
Source:
Data analysis, 2018

Adjustment in Risks Management Policies
The percentage of how often the respondents’ organizations change its guidelines or policies to manage risk. In results in figure 4.7, show that most of the respondents (82.40%) replied that their organization changes their guidelines or policies to manage risks once per year. 11.80% of the respondents replied that their organizations changed their guidelines or policies one every 2 years and changing once in more than 2 years had 5.90%. That means that most of the organizations think they should change their guidelines or policies to manage risks once per year.
Figure 4.7: How often Organization change it’s Policies to Manage Risks
82.4
11.8
5.9
0
20
40
60
80
100
Line 1
5.9
82.4
11.8
After every two years
After an interva
Once per year
l of more
82.4
11.8
5.9
0
20
40
60
80
100
Line 1
5.9
82.4
11.8
After every two years
After an interva
Once per year
l of more

Source: Data analysis, 2018
Effect of Risks Management Practices on Influence of Sustainability of
Profitability
The study findings in Table 4.18, indicates the impacts of risks management practices taken to monitor risks occurrence in banking. Study findings on to what extent risk identification improved banking operation has, it was observed that, 41.3% agreed that it has highly improved, 33.8% asserted that it has moderately improved, while 25% who said it was still low. Moreover, regarding to what extent has risk management practices supported banking operation in the bank. Results show 28.8% who agreed they highly support, 36.3% conceded that they moderately support, while 23.8% who they lowery support. Findings also examined the extent to which risks management practices has enhanced profitability in banking operation. Results show that, 63.8% were in opinion that it has highly improved profitability, 31.3% said moderately and 5% said to a lower extent.
Table4.18: Adequacy of risks management practices taken to monitor risks occurrence
Attributes Very high High Moderate Low Very Low
To what extent has risk identification improved banking operation? 12 21 27 13 7
To what extent has risk management practices supported banking operation in the bank? 11 22 29 12 7
To what extent has risks management practices enhanced profitability in banking operation? 9 42 25 3 1
Has risks management practices enhanced level of staffs’ commitment in banking operation? 3 25 33 11 8
To what extent has risk mitigation improved transparency in banking operation? 9 23 36 9
3
Has risks management practices enhanced level of skill/expertise/experience of risk managers 2 26 29 16 7
Source: Data analysis, 2018
Nevertheless, findings Table 4.19 show that, 35% of the staff said it has highly enhanced level of staff’s commitment, 41.3% indicated moderately while 23.8% indicated it has enhanced to a lower extent. Regarding to what extent has risks mitigation improved transparency in banking operation, findings show that, 38.8% agreed it has highly helped to improve risk mitigation, 45% said moderately, while 155 said it has improved transparency to a low extent. Notwithstanding this, the research also examined if risk management practices has enhanced level of skills/expertise and experience. Results findings show that, 35% of the staff agreed it has highly enhanced, 36.3% indicated moderately, while 28.8% who had an opinion that it has lowery enhanced staff skills, expertise and experience of risks managers.
Table 4.19: The extent Risk Management practices adequately promote sustainability of profit
Attributes Freq %
Very adequate 15 18.75
Adequately 39 48.75
Fairly adequate 20 25
Some how
6 7.5
Not adequate at all – –
Total 80 100
Source: Data analysis, 2018
The research wanted to find out how adequate Risk Management practices developed improves in promoting sustainability of profit in commercial banks. The findings depicts that 18.75% finds it adequate, 48.75% indicates that the risk management practices developed promotes sustainability of profit while 25% recommends for fairly adequate and 7.5% concurred with somehow.
Challenges facing Risks Management
The results findings in Table 4.20, meant to examine the challenges facing risks management in banking industry. The results reported shows that, 20% of the respondents responded that lack of information given to staff on how to overcome risk, 12.5% of the respondents said poor policies and procedures governing banking industry, 30% of the respondents said the regulatory and supervisory practices are highly diverse in banking industry.
Table 4.20: Challenges facing risks management in banking
Attributes Freq %
Lack of information given to staffs on how to overcome risk 16 20
Poor policies and procedures governing banking industry 10 12.5
The regulatory and supervisory practices are highly diverse 24 30
Underdeveloped inter-bank and money market trading 13 15
Poor policies governing insurance policies in the country 14 17.5
Others (specify) 4 5
Total 80 100
Source: Data analysis, 2018
Study findings further show that, 15% of the respondents indicated that, challenges are contributed by underdeveloped inter-bank and money market and government securities, 17.5% of the respondents said that poor policies governing insurance policies in the country while 5% did not respond to the questions. The study finding in Figure 6 meant to examine the challenges facing risks management in banking industry, as presented in the paragraph given above.

Measures used in Addressing Banking Risks
Measures for Improving Risks Management Practices
The study finding in table 4.21 was responding to the question which examined appropriate measures that are used in improving risks management practices in commercial banks. The results finding show that 15% of the respondents said that annual review of banking policies and procedures, 30% of the respondent said that monthly and quarterly reporting to management committees or board meeting.
Table 4.21 Measures that can be undertaken to improve Risk management in practices
Attributes Freq %
Annual review of banking policies and procedures 12 15
Monthly and quarterly reporting to management committees 24 30
Enhancing compliance to banking policies and procedures 16 20
Impressing staff’s responsibility and accountability 6 7.5
Training staffs to understands banking policies and regularities 12 15
Motivating staffs, offering rewards to best perform 10 12.5
Total 80 100
Source: Data analysis, 2018
Furthermore, the results finding show that 20% of the respondent said that this can be done by enhancing compliance to banking policies and procedures, 7.5% said that this can be done by impressing staff’s responsibility and accountability. Moreover, the results finding show that 15% of the respondents said that is done by training the staff to understand banking policies and regularities and 12.5% of the respondents said this can be done by motivating staff, offering rewards to best performers.
Training on Risks Management
The percentage of how often organizations provide risk management training courses is presented in Figure 4.8. The researcher asked the respondents about the frequency of risk management training in their organizations. The results show that most of the respondents’ organizations (41.20%) have a risk management training course less than one time per year.
Figure 4.8: How often does the organization provide risks management training courses
41.2
23.5
11.8
23.41
0
10
20
30
40
50
Line 1
23.41
41.2
23.5
11.8
Less than one time per
Twice or more per
Once per year
Never had equal
41.2
23.5
11.8
23.41
0
10
20
30
40
50
Line 1
23.41
41.2
23.5
11.8
Less than one time per
Twice or more per
Once per year
Never had equal

Source: Data analysis, 2018
Nevertheless, results show that, 23.50% have a risk management training course one time per year and 2 times per year, more than 2 times per year and never had equal percentages, namely 11.89%. The response to the interview questions which was assessing the percentage of organizations which have established procedures for keeping up-to-date and informed with changes in regulations, after that we asked a yes or no question about training. The results show that show that 94.10% of the respondents answered ‘Yes’, their organization does have established procedures for keeping up-to date and informed with changes in regulations. But 5.90% do not.

On the other hand, the researcher conducted an interview to examine the percentage of how many organizations offer training for new employees we also asked yes or no question about training courses for new employees. The results show that 85.3% have a training course for new employees but 4.70% do not. That means most of the respondents’ organizations think training new employees is important.

Appropriate Measures to Mitigate Banking Risks
The study finding in Table 4.22 was responding to the question which was examining what other measures taken to reduce banking risk by diamond trust bank.

Table 4.22 Other Measures used to overcome banking risks
Attributes Freq %
The Bank has to exhausting the procedures and process before administering credit 1 5
The Bank has ensuring continuity of updating credit-index manual yearly 2 10
Setting clear parameters for the type of credit, and customers business history 3 15
Updating of credit policy, closure monitoring & advisory to customer 2 10
Monitoring of banking investment and adherence to uniformity in credit practices 12 60
Total 20 100
Source: Data analysis, 2018
The results findings in Table 4.22, indicates the following measures that has to be implemented in overcoming banking risks, 5% of the respondents said that the Bank has to exhaust the procedures and process before administering credit and finance any project, 10% said the Bank has to ensure constant and continuity of updating risk-rating index or manual yearly depending on market situation, 15% said bank has to set clear parameters that will enables to detect any risk before occurring, and customers business history is significant.

The finding also indicate that 15% of the sampled staff indicated that continuous updating of risk policy to according to market changes, close monitoring of customer’s project performance and business advisory if needed,10% of the sampled staff responded that bank officers should have close monitoring of the investment and supply detailed information brochure to customers, last but not least 35% of the respondents said the management has to ensure consistency and adherence to uniform and safety risk evading practices by proper monitoring and appraisal of banking activities.

Pearson Correlation Analysis of Risks Management Attributes
The relationship between risk management practices, risk management policy, employee involvement and profitability in commercial banks was determined using Pearson Correlation Coefficient as shown in the correlation matrix below. The results of analysis in Table 4.21 show that there is significant and positive correlation between risk management practices and risk management policy (r = 0.50, p-value<0.000). Furthermore, from Table 4.21 it was identified that Risk management practices confirm risk management policy by (25%).This implied that Risk management practices significantly and positive confirm risk management policy in commercial banks in Tanzania.
Table 4.23: Pearson Matrix
Risk management practices risk
management
policy employee involvement profitability Management
practices
Risk management practices 1
risk management policy 0.50 1
employee involvement 0.61 0.27 1
Profitability -0.08 -0.07 -0.19 1
Management practices 0.49 0.12 0.30 0.03 1
Source: Data analysis, 2018
From Table 4.23 above it can be revealed that there was significant and positive correlation between Risk management practices and employee involvement (r = 0.61, p value<0.000). Furthermore, from the Table 4.23 it was identified that Risk management practices confirm employee involvement by (37.21%).This implied that Risk management practices significantly and positive confirm employee involvement in commercial banks in Tanzania.
From the Table 4.23 above it can be revealed that there was no significant and positive correlation between Risk management practices and profitability (r = -0.08, p value>0.000). Furthermore, from the Table 4.23 it was identified that Risk management practices does not influences sustainability of profitability in commercial banks by (0.64 %). Same results show that, there was significant and positive correlation between Risk management practices and management practices (r = 0.49, p-value<0.000). Furthermore, from the Table 4.23 it was identified that Risk management practices effect management practices by (24.01%).This implied that Risk management practices significantly and positive influences management practices in commercial banks in Tanzania. It has also been observed that, if commercial banks increase their efforts on risks management practices, the banking performance also improves concurrently.
Linear Regression for Risks Management Attributes
Risk Management Policy
The results findings in Table 4.24, presents linear regression analysis between risk management policy and risk management practices. The findings in Table 4.24 indicate that risk management policies have a significant effect on risk management practices in commercial banks.
Table 4.24 Regression Analysis of Risk management practices and risk management policy
Model Unstandardized Coefficients Standardized Coefficients t-value p-value
B Std. Error Beta (Constant) 0.71 0.23 0.00 3.14 0.000
Risk management policy 0.44 0.09 0.50 5.07 Dependent Variable: risk management practice
The findings in the Table 4.24 revealed that risks management policy has significant effect on the risks management practice (?=0.50, ? = 0.000) were found. The coefficient of 0.44 suggests that a change (increase) of risk management practice by a unit, risk management policy changes (increases) by 0.44 units. The coefficient 0.71 is a constant parameter in most cases, it has no economic meaning. But, it could simply mean that when risk management practices do not exist, risk management policy takes the value of 0.71.
Employees Involvement
The presented findings in Table 4.25 present linear regression analysis of Risk management practices and employees involvement. The study findings in Table 4.25 below depict that employees’ involvement has a significant effect on risks management practices in commercial banks.

Table 4.25 Regression Analysis of Risk management practices and employees involvement
Model
Unstandardized
Coefficients
Standardized
Coefficients

B
Std. Error
Beta
t-value
p-value
(
Constant)

1.89
0.20

0.00

9.27

0.000
Employees involvement

0.53
0.08

0.61

6.85
0.000

a.
Dependent Variable:

Risk management practice
Model
Unstandardized
Coefficients
Standardized
Coefficients

B
Std. Error
Beta
t-value
p-value
(
Constant)

1.89
0.20

0.00

9.27

0.000
Employees involvement

0.53
0.08

0.61

6.85
0.000

a.
Dependent Variable:

Risk management practice

The findings in the Table 4.25 show that the employees involvement has significant effect on the risks management practices (?=0.61, ? = 0.000) were found. The coefficient of 0.53 suggests that a change (increase) of risk management practice by a unit, employees’ involvement changes (increases) by 0.53 units. The coefficient 1.89 is a constant parameter, in most cases, it has no economic meaning. But, it could simply mean that when risk management practices do not exist, employment involvement takes the value of 1.89.
Therefore, Risk management practice = 0.53 employee involvement + 1.89.
Management Practices
The study findings in Table 4.26 examined the regression analysis of risk management practices against management practices.
Table 4.26 Regression Analysis of Risk management practices and management practices
Model Unstandardized
Coefficients Standardized
Coefficients
B Std. Error Beta t-value p-value
(Constant) 1.37 0.26 0.00 5.24 0.000
management practices 0.49 0.10 0.49 4.95 0.000
Dependent Variable: Risk management practices.

The study findings in the 4.26 show that management practices has a significant effect on risks management practices in commercial banks (?=0.49, ? = 0.000) were found. The coefficient of 0.49 suggests that a change (increase) of risk management practice by a unit, management practices changes (increases) by 0.49 units. The coefficient 1.37 is a constant parameter, in most cases, it has no economic meaning. But, it could simply mean that when risk management practices do not exist, management practices takes the value of 1.37.

Therefore, Risk management practices = 0.49 management practice + 1.37.
CHAPTER SIX
DISCUSSIONS OF FINDINGS
The findings reported in chapter four are discussed in this chapter in relation to research questions formulated and outlined in chapter one.

Influence of Risk Management Policy in Risk Management Practices
Results from the correlation analysis indicate a significant and positive correlation between risk management practices and Risk management policy (r = 0.50, p value<0.000). Therefore, from the results it was concluded that risk management practices confirm risk management policy by (25%).Results from the regression analysis indicate that risk management policy has a significant effect on risk management practices in commercial banks (?=0.50, ? = 0.000) were found.

On the basis of Beta coefficients the model shows that Risk management policy causes 44 % positive variation in Risk management practices and t -value is also significant. These results are supported by Boynton and Zmud (1984), who underscored the effects of Risk management policy on the Risk management practices in commercial banks.

Influence of Employees Involved in Risk Management Practices
Results from the correlation analysis indicate a significant and positive correlation between Risk management practices and employees involvement (r = 0.61, p value<0.000). Therefore, from the results it was concluded that employees involvement influence Risk management practices by (37.21%).Results from the regression analysis indicate that employees involvement has a significant effect on Risk management practices in commercial banks (?=0.61, ? = 0.000) were found. On the basis of Beta coefficients the model shows that employees’ involvement causes 53% positive variation in Risk management practices and t -value is also significant. However, these findings support the results of many other previous studies which showed that employees’ involvement has a significant effect on Risk management practices Galorath (2006), who focused on the importance of risk management, the essence of risk management and assess the processes to implement risk management.

Influence of Management Practices used by Commercial Banks in Tanzania
Results from the correlation analysis indicate a significant and positive correlation between Risk management practices and management practices (r = 0.49, pvalue<0.000). Therefore, from the results it was concluded that management practices influence risk management practices by (24%).Results from the regression analysis indicate that management practices has a significant effect on risk management practices in commercial banks (?=0.49, ? = 0.000) were found. On the basis of Beta coefficients the model shows that management practices causes 49 % positive variation in Risk management practices and t -value is also significant. This finding is supported by Mangiero (2004) who focused on the risk management culture in an organization and insisted on the issues concerned.

Effects of Risks Management Practices on Sustainability of Banking Profit
The study examined the effects of risks management practices on the sustainability of profitability of commercial banks in Tanzania. Results from the correlation analysis indicate weak significant and positive correlation between Risk management practices and profitability (r = 0.08, p-value>0.000). Therefore, from the results it was concluded that profitability influences risk management practices by (0.64 %).

The results from the regression analysis indicate that profitability has a weak significant effect on risk management practices in commercial banks (?=0.08, ? = 0.48) were found. On the basis of Beta coefficients the model shows that profitability causes 0.05 % negative variation in risk management practices and t -value is also no significant. This finding is supported by Hillier, (2003) in his study focused in treasury management he concluded the efficient risk management is very important in managing risks of financial risk and liquidity of the business.

CHAPTER SIX
SUMMARY, CONCLUSION AND RECOMMENDATIONS
This chapter gives a brief summary of the study, conclusion and recommendations based on the findings in chapter four on the effectiveness of risks management in commercial banks.

Summary of the Study
The main objective of this study was to assess risk management practices used by commercial banks in Tanzania. The study used both second and primary data in both qualitative and quantitative techniques. Primary data established interview, observation and Questionnaires to responsible six bank employees and administrators operating in Dar es salaam to assess different levels of risk management in their respective departments. Secondary data used documentary review. The research design used in this study is cross-section design. Data was collected using the questionnaire technique from a sample size of 100 distributed questionnaires to targeted respondents of which 80 questionnaires were returned back. The parent population was 170. The results from this analysis were presented in from of table of frequencies, percentages, and correlation and regression analysis to show the effect between different variables with the relevant literature.

The study indicates that commercial banks in the country has continued to strive in difficulty on the management of risks, as most commercial banks appear to be caught in a vicious cycle that moves between rapid growth in the ‘good’ times and virtual standstill when a crisis hits back. The study further revealed that all focused banks do constantly apply risk management procedure for example risk mitigation manuals proper monitoring and supervision of banking operation.

Furthermore, the findings in this study revealed that risk management policy, employee involvement and management practice has significant effect on the risk management practice in commercial banks. But also, the findings showed that profitability has weak significant influence on the risk management practice.

Following conclusion made, this research work recommends that, with this foundation for mutual understanding, all parties will be able to speak a common language and communicate more effectively. Business executives will be positioned to assess their company’s enterprise risk management process against a standard, and strengthen the process and move their enterprise toward established goals. Future research can be leveraged off an established base. Legislators and regulators will be able to gain an increased understanding of enterprise risk management, including its benefits and limitations. With all parties utilizing a common enterprise risk management framework, these benefits will be realized.

Conclusions
It is the responsibility of the management to ensure that internal control systems are developed and maintained on an ongoing basis in order to provide reasonable assurance regarding; Operational efficiency, Safety of the bank assets, compliance with applicable laws and regulations and business continuity.

Risk management involves the maintenance of losses and the value of the bank to within accepted margins. Types of risk, in general, include: market risk, legal risk, operational risk, liquidity risk and credit risk. Moreover, each organization’s risk changes constantly. From this study we have learned that while reaction is sometimes necessary, detecting and reacting are insufficient as ways of managing risk. Every organization must learn to anticipate and prevent by implementing effective processes throughout the company so that it proactively identifies, measures, and controls business risk.

As is the case with management in general, banking risk management is never changing process shaped by general factors, such as the institution objectives, financial trends, and government regulation; and by special factors, such as the structure and cost of liabilities, the structure and returns of assets, the maturity structure of assets and liabilities, and the size and source of the risk assumed by each asset and liability item.

This implies that, banking risk management will continue to grow from a minor to a major factor in banking management, turning from a defensive weapon to an important part of the offense to use. Therefore, bankers must set aside the resources to acquire and use this weapon efficiently and effectively to compete in the globalizing economy.

In this study it is therefore concluded that risk management policy, employee involvement and management practice has significant effect on the risk management practice in commercial banks. But also, the findings showed that profitability has weak significant influence on the risk management practice.

Recommendations
The research recommends possible measures to be approached as a result of this report depending on position and role of the parties involved
To the Board of Directors and Management Implication
The board should discuss with senior management the state of the entity’s enterprise risk management and provide oversight as needed. The board should ensure that it is appraised of the most significant risks, along with actions management is taking and how it is ensuring effective enterprise risk management. The board should seek input from internal auditors, external auditors, and others.

This study suggests that the chief executive assess the organization’s enterprise risk management capabilities. In one approach, the chief executive brings together business unit heads and key functional staff to discuss an initial assessment of enterprise risk management capabilities and effectiveness. Whatever its form, an initial assessment should determine whether there is a need for, and how to proceed with, a broader, more in-depth evaluation. In order to be protected from the potential risks are various and different. It is important to apply each method and tool to the suitable risk because each one is created from different reasons and situations. Risk management is an ever changing process and its evolution tends to be even greatest in the future.

Employee’s Involvement and Training
Employee have to be trained so as the company to occupy people that are experts and skilful with experiences for management and implementation. These people have to be capable of thinking and practicing the risk management strategy so as to protect the organization in a developing environment like the one of banking. With this foundation for mutual understanding, all parties will be able to speak a common language and communicate more effectively. Business executives will be positioned to assess their company’s enterprise risk management process against a standard, and strengthen the process and move their enterprise toward established goals.

Ensuring Sound and Effective Communicating and Feedbacks with the Client
The banks should ensure that all the terms and conditions are communicated to, and fulfilled by the client without exceptions. Conditions like perfection of all collateral documents and timely submission of all the required information by the client should always be observed. There must be training and retraining of the clients by the banking officers and other staff involved in banking operation especially credit administration specifically in all aspects of credit assessment, monitoring, control and recovery process.

The bank should improve its risk rating systems so as to enhance recovery.

Drawing Experience from the Past Observation for Improvement
The banks should be able to draw useful lessons from past experiences and have a keen awareness of the need to identify measure, monitor and control banking risk. Use of a well experienced staff will assist in eliminating and avoidance of human judgment in decision making in faulty, enhance decisions on responding to risk and establishing controls need to consider the relative costs and benefits. Normally, breakdowns can occur because of human failures such as simple errors or mistakes. These limitations preclude a board and management from having absolute assurance as to achievement of the entity’s objectives. This study research encourages the banking supervisors to promote sound practices for managing risk while at the same time ensuring that the banking risk are avoided for better business operations.

Risk Reporting
Management should ensure that information is received by the appropriate people, on a timely basis, in a form and format that will aid in the monitoring and control of the business. The reporting process should include information such as; the critical operational risks facing, or potentially facing, the institution risk events and issues together with intended remedial actions, the effectiveness of actions taken, details of plans formulated to address any exposures where appropriate, areas of stress where crystallization of operational risks is imminent; and the status of steps taken to address operational risk.

Establishing Control Mechanism
Although a framework of formal, written policies and procedures is critical, it needs to be reinforced through a strong control culture that promotes sound risk management practices. Banks should have policies, processes and procedures to control or mitigate material operational risks. Banks should assess the feasibility of alternative risk limitation and control strategies and should adjust their operational risk profile using appropriate strategies, in light of their overall risk appetite and profile. To be effective, control activities should be an integral part of the regular activities of a bank. Banks should have in place contingency and business continuity plans to ensure their ability to operate as going concerns and minimize losses in the event of severe business disruption.

Areas for Further Studies
As the above discussions suggests, there is a considerable scope for further research to enhance our understanding of the benefits and shortcomings of consolidated risk management. Many of the key researcher questions involve technical issues in risk management, policy and adequacy of risk management practices. While these questions are vital to understanding how bankers manage risk and consolidated measures of risk exposure spanning all of banking industry and risk factors, they are not, the only questions of interest. Further research into the main article-Risk management practices- could produce findings that would be of clear use of bank supervisors and other financial institutions.

This study provides presents some initial ideas, but clearly much more work needs to be done. We hope that this article can serve as a starting point for further discussion. However, the framework might be the subject of academic research and analysis, to see where future enhancements can be made. With the presumption that this report becomes accepted as a common ground for understanding, its concepts and terms should find their way into university curricula. With this foundation for mutual understanding, all parties will be able to speak a common language and communicate more effectively.

Business executives will be positioned to assess their company’s enterprise risk management process against a standard, and strengthen the process and move their enterprise toward established goals. Future research can be leveraged off an established base. Legislators and regulators will be able to gain an increased understanding of enterprise risk management, including its benefits and limitations. With all parties utilizing a common enterprise risk management framework, these benefits will be realized.

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APPENDIX I: QUESTIONNAIRES FOR THE BANKING EMPLOYEES
SECTION A: BASIC INFORMATION

Please show your level of education (?)
Certificate
Diploma
Graduate
Others (specify)………..
Please indicate your gender (?)
Male
Female
Please indicate your work experience in banking industry (?)
Less than 1 years
1-3 years
4-6 years
6 years and above
SECTION B: RISK MANAGEMENT PRACTICES CONFIRM WITH RISK POLICY
Is there any establishment of risk management policy in your organization?
Please tick (?) for the appropriate
i Agree
ii Strongly agree
iii Disagree
iv Strongly disagree
v Not sure

Is Risk Management Practices in your bank confirms with risk management policy?
Please tick (?) for the appropriate
i Confirm very high
ii Highly confirm
iii Lowly confirm
iv Very Low confirm
v Not aware at all
SECTION C: EMPLOYEE INVOLVEMENT.
To what extent are you aware of banking specific risks?
Please tick (?) for the appropriate
i Very high extent
ii High extent
iii Low extent
iv Very Low extent
v Not aware at all

Indicate the extent that the following risks are specifically relevant to your organization?
5=Very relevant;4=Relevant;3=Moderate;2=Less Relevant;1=Completely Irrelevant
i Legal Risk
ii Market Risk
iii Operational Risk
iv Credit Risk
v Liquidity Risk
vi Equity Price Risk
vii Foreign Exchange Risk
viii Interest Rate Risk
ix Strategic Risk
x Compliance Risk
xi Other (specify)………………………………………

How is employee’s involvement in risk management practices in your Organization?
Please tick (?) for the appropriate
i Very high involved
ii Highly involved
iii Low involved
iv Very Low involved
v Not involved at all

SECTION D: RISKS MANAGEMENT PRACTICES
Do you assert that, the following technical procedures and practices are actually being used by the bank?
Please tick (?) for the appropriate Agree Strongly agree Disagree Completely disagree Not sure
i Risk Transferring to other participants
ii Risk elimination or avoided by business practice
iii Risk actively managed at the firm level

Are established Risks Management practices/procedures are followed and observed in your bank?
Please tick (?) for the appropriate
i Agree
ii Strongly agree
iii Disagree
iv Strongly disagree
v Not sure

How frequently the practices and procedures are being used by the Bank. (?)
Continuous process
Per transaction
Annually
iv. Semi annually
Quarterly

Our Bank has risk rating process taken to monitor risks occurrence in banking.
Activities Risks Rating and Monitoring
Very strong Strong Fairly Weak Very weak
i Extent of risk rating process?
ii Extent of risks monitoring process?
iii Level of involvement of staffs in risks monitoring process?
iv Level of commitment by staffs in risks monitoring?
v Level of management support in risks management process?

SECTION E: EFFECTS OF RISKS MANAGEMENT PRACTICES ON SUSTAINABILITY OF PROFIT

Adequacy of risks mitigation practices/approaches.
Adequate of risks mitigation practices Very high High Moderate Low Very
Low
14 To what extent has risk identification improved banking operation?
15 To what extent has risk management practices supported banking operation in the bank?
16 To what extent has risks management practices enhanced profitability in banking operation?
17 Has risks management practices enhanced level of staffs’ commitment in banking operation?
18 To what extent has risk mitigation improved transparency in banking operation?
19 Has risks management practices enhanced
level of skill/expertise/experience of risk managers
20. At what extent is risk management practice adequate in promoting sustainability in profitability of commercial banks in Tanzania (?)
a. Adequately b. Very adequate *

c. Fairly adequate d. Not adequate at all
e. Some how

Give your comments in terms of the effects on risks Management practices in your
Organization? ………………………………………………………………………………………………………..
In your opinion, what do you think are the appropriate measures that can be taken to improve level of risks management practices in your organization? ………………………..………………………………….

Thank You for Your Time and Cooperation

APPENDIX II: INTERVIEW GUIDE FOR SENIOR MANAGERS.
Does your organization face any risk in conducting banking business?
What types of risks are likely to occur in an organization?
What are the steps undertaken by management in the overall process of risk management?
Is there any relationship between the risks that occur and banking performance?
What are the interrelationship between types of risk and banking performance?
Who is responsible in evaluation and management of risk?
What are techniques for monitoring the risks?
How does bank’s management participate in evaluation and management of risk?
Is there any possibility of mitigating/elimination risk in the firm?
What are the duties that the risk manager and risk department generally do?

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