Operational risk management and financial performance in the banking sector in Uganda: A case study of Stanbic Bank Mpigi Branch Uganda

Abstract

The study was about the Operational Risk Management and Financial Performance in the Banking Sector in Uganda focusing on Stanbic Bank Uganda, Mpigi Branch. The study was guided by the following objectives: To examine how Stanbic Bank has identified the degree of risk to enhance liquidity, to assess how Stanbic Bank has assessed and analyzed operational risk to ensure profitability and to examine how Stanbic Bank Uganda has monitored operational risk to enhance reduction in non-performing loans. The study used a phenomenological approach and the research strategies included experiment, survey and case study. The study population and sample size was 52 which was determined using census sampling method and this was because they were few in numbers. The study found that the regression coefficient between two variables was significant and positive since the r results were positive. This finding suggested the rejection of the null hypothesis implying that operational risk management significantly affected financial performance in Stanbic Bank and thus an improvement in operational risk management would increase financial performance. The results from the study revealed that there is a significant positive relationship between operational risk management and financial performance in Stanbic Bank which is represented by R2 of 57%. The findings are consistent with the view that operational risk management is management function that is critical for proper financial performance and the study further revealed that, the monitoring system of Stanbic Bank is weak and this has caused some loss to the Bank.

The study recommended that, Management of Stanbic Bank should tighten its operational risk management systems in order to continue improving its financial performance and Stanbic Bank should regularly study and assess its opportunities to achieve its financial objectives. The Bank should also improve on its monitoring system in order to avoid some losses. The study also came up with areas for further study which include: i. Internal financial controls and financial performance of Stanbic Bank. ii. Credit risk management and profitability of commercial Banks in Uganda iii. Liquidity risk management and financial performance of Stanbic Bank.