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Impacts of Operational Risk Management on Financial Performance:A Case of Commercial Banks in Nigeria

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  • Olajide Solomon Fadun

    (Department of Actuarial Science and Insurance, University of Lagos, Lagos, Nigeria)

  • Diekolola Oye

    (Department of Actuarial Science and Insurance, University of Lagos, Lagos, Nigeria)

Abstract

Increase in losses borne by banks as a resultofinadequate operational risk management practices and the adverse impact on banks’ financial performance has been a major concern to bank management and regulators. Hence, the purpose of this study is to analyse the impact of operational risk management practices on the financial performance of commercial banks in Nigeria. 10-years (2008 -2017) secondary data extracted from audited financial statements of selected commercial banks in Nigeria was used for the study. The data was analysed using the Linear Multiple Regression Model. The results showed that there is a positive relationship between operational risk management and the financial performance of banks. The findings revealed that sound operational risk management practices impact positively on the financial performance of banks. We, therefore, recommend that banks’ management should deploy adequate resources towards understanding operational risk to ensure sound operational risk management and improved financial performance of banks. The study isbased on a limited scope; therefore, a larger sample size may make for an interesting research in the future.

Suggested Citation

  • Olajide Solomon Fadun & Diekolola Oye, 2020. "Impacts of Operational Risk Management on Financial Performance:A Case of Commercial Banks in Nigeria," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(1), pages 22-35, January.
    • Handle: RePEc:rbs:ijfbss:v:9:y:2020:i:1:p:22-35
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    References listed on IDEAS

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    3. Barbu Teodora Cristina & Olteanu (Puiu) Ana Cornelia & Radu Alina Nicoleta, 2008. "The necessity of operational risk management and quantification," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 3(1), pages 661-667, May.
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    5. Juliana Stanley Isanzu, 2017. "The Impact of Credit Risk on the Financial Performance of Chinese Banks," Journal of International Business Research and Marketing, Inovatus Services Ltd., vol. 2(3), pages 14-17, March.
    6. Jane Gathigia Muriithi & Kennedy Munyua Waweru, 2017. "Liquidity Risk and Financial Performance of Commercial Banks in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(3), pages 256-265, March.
    7. Power, Michael, 2003. "The invention of operational risk," LSE Research Online Documents on Economics 21368, London School of Economics and Political Science, LSE Library.
    8. Jane Gathigia Muriithi & Kennedy Munyua Waweru, 2017. "Operational Risk, Bank Size and the Financial Performance of Commercial Banks in Kenya," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(3), pages 39-50, April.
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    Cited by:

    1. Cicilia Monica Agustina & Adler Haymans Manurung & Amran Manurung, 2023. "Factors that Affect Bank Risk in Commercial Banks that Are Publicly Listed," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(3), pages 1-2.

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