RISK MANAGEMENT PRACTICE IN COMMERCIAL BANK OF ETHIOPIA (CBE)

Abstract

This thesis is aimed at the assessments of risk management practices of Commercial Bank of Ethiopia. The data was obtained from primary sources that were collected through questionnaire and analyzed by the descriptive form of research design. Open and closed-ended questionnaires were administered to 267 respondents from selected districts and head office and analyzed using SPSS software package. The questionnaires covered key aspects of risk management including the importance of risk management practices, risk identification, risk monitoring and nature of risk management practices. According to the analysis made the main finding of the study is that credit and liquidity risks are identified as risks that affect the bank seriously. Moreover, GAP- analysis, Duration GAP-analysis and Risk adjusted rate of return on capital (RAROC) are the major practices the bank use to identify the risks to manage it. The bank should also look for the best ways to mitigate the prevalence of these risks and strength the existing risk identification practices. Some recommendations were made and prominent amongst them were that banks should give emphasis on staff training in the area of risk management and they must make risk visible, measurable and manageable and ensure a meaningful risk controlling culture throughout all processes and activities.