Risk Management and Portfolio Analysis in the Capital Market
Chapter One
Objectives of the Study
- To identify the types of risk associated with or related to banks in
- To examine management techniques normally applied in the management of risk in the capital market.
- To suggest how to evaluate and control risk in the capital market.
- To assess how personnel quality in the examination of risk management reduces banks’ distress.
- To find out whether the relationship between the bank officials and customers is cordial.
CHAPTER TWO
LITERATURE REVIEW
Introduction
Examination of risk management in an organization has a typically issue with academics and business practitioners over the years. A high percentage of these three groups do not understand the importance of examination in risk management but unfortunately, the issue is handled on life services basis among business concerned Dickson (1984).
Hence, this study focuses on the review and articulation of related contemporary literatures on examination of risk management in business organization and financial institutions alike. The subsequent part of this literature review will also unfold the dynamics in examination of risks and its management in an organization.
Concept in Examination of Risk Management
The concept in examination of risk management is the combination of three term married together; the divorcing of the three terms and reintegration will give a better understanding of the phenomenon of examination in risk management in organization. Examination may refer to: physical examination, a medical procedure, (more popularly known as a check-up or medical) is the process by which a medical professional investigate the body of a patient for signs or disease. Questioning and more specific forms thereof, for example in law: cross-examination, direct examination. Bank examination; and examination of the affairs and records of a bank by a state or federal bank examiner, the term risk has no single definition. It is an everyday language used by different people to mean different things depending on the circumstances. Economist, behavioral scientists, risk theorist, statisticians, and actuaries each have their own concept of risk. However, risk traditionally has been defined in terms of uncertainty. Based on this concept, risk defined here as uncertainty concerning the occurrence of a loss (Rejda 2005).
According to Dickson and stein (1999) risk is the likelihood that the hazard will indeed cause the peril to operate and cause the loss.
Similarly, Bola et al (2009) defined risk as the probability and consequences associated with a particular course of action or in the alternative, a hazard concerned by a contract of insurance. Also, Harrington and Niehaus (1999) content that, risk is the doubt concerning the outcome in a given situation; hence it is uncertainty as to the occurrence of a loss, risk is unpredictability of an unfortunate occurrence, risk is the chance of loss, risk is a combination of hazard; finally, when risk is defined as uncertainty, some authors make a careful distinction between objectives risk and subjective risk, objective risk (also called degree of risk) is defined as the relative variation of actual loss from expected loss, while subjective risk is defined as uncertainty based on a person’s mental condition or state of mind (Rejda 2005).
Management according to Fayol (1949) is task managers must perform to be successful which are articulate as managerial functions: planning, organizing, coordinating, commanding, and controlling. Stoner et al. (2000) defines management as the process of planning, organizing, leading, and controlling the work of organization members.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter composes of the population, sample and sampling techniques, sources and methods of data collection, and method of data analysis.
Research Design
The research design used for this research work is descriptive design. A descriptive design consist of a set of gathered data or information analyzed, summarized and/or interpreted along certain line of thought for the pursuit of specific purpose or study. For the purpose of this work, a descriptive design will be used because it describes the characteristics of certain factors to make specific prediction. The research work uses two variables: that is, independent variable and dependent variables.
The independent variables comprises the role of management proficiencies and quality of capital markets as it stands alone and its justified by the following factors; viable financial records, nature of operations, quality of personnel etc., and when it is intensified the effect will be felt on risk impact.
The dependent variable is risk management and the varying from it takes. This is so when capital market performs its role in risk management, risks will be alleviated or reduced.
Population of the Study
In the course of this study, the population for the research is about 5000 people, out of which about 90 staff and 4,910 customers of Nigeria stock Exchange.
CHAPTER FOUR
DATA PRESENTATION ANALYSIS
Introduction
This chapter presents the data collected through questionnaires administered to the respondents. The analysis of data is done by using frequency, percentage method. The chapter is presented into two sections, that is the analysis of customer’s responses and staff members of the bank are done separately.
In all, ninety (90) questionnaires were designed and administered, but only seventy- eight (78) were filled and returned by the respondents. The respondents comprises of fifty-eight (58) customers and ten (20) staff members of Nigeria stock Exchange. The questionnaire distribution is shown in the table below:
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
Introduction
The chapter present the summary of chapters contained in this report. We followed the summary with conclusion and findings drawn from the review literature and the theoretical analysis of examination of risk management in the Nigerian capital market. The chapter was rounded up with recommendation mutually satisfy the needs of consumers and ensure maximally profitable operations by banks.
Summary
This research work entitled “
Chapter one of this study contains the introduction and background on the role banking system on the economic development of any nation. It also emphasis on the concept of risk in the capital market which according to CBN in its prudential guidelines means as-hazard experience by as a result of improper check on capital utilization. The statement of problem point out that a system does not exist totally immune to the dynamics of environmental forces most especially the financial institution that operates on speculative arrangement and poses certain questions related to how the manage such uncertainty related to their operations. The main objective of the study is to find and acquire practical means of identifying risks and controlling it using any suitable techniques available. It also contains the significance of the study; the scope of the study is limited to the areas only, and finally a hypothesis and chapter scheme.
Literature review of this study involve a complete diagnosis of the reservoir if information existing in certain books, journals and articles as well as assertion written by various authors which have some relationship with our areas of study. It highlights several ways of identifying and controlling it to minimize to a bearable limit as opine by Shaha (2011), Ernest and Young (1979) Renand and Klinke (1997). Methodology employed by the research work to obtain the necessary data analyzing the data was obtained from the secondary source which includes historical and record studying method. Chapter four deal with data analysis which was obtained during the course of the research work. It contains the interpretation of respondent response to questions in the questionnaires distributed and the discussion of the results well as the testing of hypothesis.
Conclusion
The study reveals the following finding;
- That banking business is a very risk one, as the planning and control of such phenomenon is very paramount to the operations and survival of the banking institution.
- The study also reveals that risk management in the capital markethaves positive correlation with the availability of human
- The institution selected for the study reveals that its risks management system is adequate and strong enough to minimize (or even totalavoidance) inefficiencies and other negative happing in the banks of which only rules and regulation guiding such control are rigorously adhered to.
Thus an improvement in risk management is believed will greatly improve the level of profitability of Nigeria stock Exchange.
Management of risk needs assurance that a company asset are being properly safeguarded, that reliable information is generated, that operations are running efficiently, that risk managed and that sophistication of financial products and services client are requiring nowadays. These are assumed to be the vision of a good management to control. From the study it was revealed that there was a significant effect between risk management and profitability of capital markets. There was a positive relationship between operational efficiencies and risk management.
However, this system cannot operate efficiently in a vacuum; unfortunately, the prevailing harsh economic situation in the multitude of banks. Nevertheless negative banking cultures and others are not immense to positive changes avoidance, reduction of risk is very important and it is a prerequisite to growth of the banking ministry.
Risk and the like in bank cannot be eradicated completely.
All the same it can be drastically reduced but only if stiffer and understood measures are taken.
The average citizen regrettably, still tends to look upon banking as something unsigned in mystery, and this stresses the need for banks to properly coordinate effort to improve its image in the economy and to restore confidence and trust it assumed before.
Recommendations
Having examined the issue of risk management and its inadequacies as main causes of ruin in an organization and having examined its effective operation, the empirical findings indicates that the relationship between examination of risk management and banks operational efficiencies and profitability is significant. Thus, the following recommendations have been drawn.
The Union Bank P.L.C should continue to appraise the risk management apparatus and block all identified hotspots in their system. In this regards other banks especially newly established one should followed their
Bank should provide for adequate salary scale its employees and in improving the conditions of employee and in minimize the pressure which leads employees
Bank should employ a systematic selection process in recruiting
Banks should train workers on the important of risk
Banks should improve staff motivation and disobedient staff should be disciplined and reward for faithfully
Banks should cooperate with the apex bank (central bank of Nigeria) government, and processional bodies concerned with the affairs of examination of risk management in
BIBLOGRAPHY
- Bank for International Settlements (2004). Principles of management, press and Supervision of Risk. Basel Switzerland: Press Communication CH-4002.
- Baranoff, E. (2004). Risk Management and Insurance. New York: Longman.
- Kin (2008): “A Critical Analysis of the Services of the Nigerian Banking Systems”, Unpublished B.Sc Degree of Banking and Finance, Covenant University, Ota, Ogun State.
- Fayol, H. (1949). General and Industrial Management. New York: McGraw- Hills.
- Nigeria stock Exchange (2019). Annual Report and Account. Retrieved at (www.fbn.com/annualreport), 12/08/2019.
- Gitman, P. (2005). Fundamentals of Risk Management, 5th ed. London: MacMillan Press.
- Gordon, A.D. (1984). Introduction to insurance, 2nd Edition. Britain: Pitman Publishing House.
- IRM (2002). Risk Measurement Standard. AIRMIC, IRM.
