Businesses are continuously exposed to a changing business environment which may either exert positive or negative influences on profitability. The banking industry, in particular, is highly competitive and bank failures can have significant consequences for customers. Commercial banks, therefore, have a responsibility to protect their customers by implementing sound risk management strategies. In light of the recent financial crises (since 2007), risk management has once again become a popular topic of discussion since adequate risk management should have prevented or minimised the impact of the risks faced by failed banks. The primary objective of this study was to develop a framework that could be used by South African commercial banks to investigate risk management. Qualitative research was conducted in this regard. From this, findings and recommendations were derived in order to provide banks with a tool by which they could assess their exposure to risk. Various journals, websites, newspapers, bank reports and textbooks were consulted in support of the literature. The literature provided background information on the history and development of the risk management process. Considerable attention was given to the categories of risk that an adequate risk management framework should address. Furthermore, the current models used to manage risk in commercial bank were provided, as well as the specific reasons for bank failures. The main findings of this study were the identification of the most significant reasons for banking failures. These were identified as capital inadequacy, credit risk due to non-performing loans and a lack of banking supervision. In addition to these reasons, several other contributing principles were identified as important factors to be included in a risk management framework. A risk management framework was thus constructed in Table 5.1 based on the literature regarding global banking failures and the relevant conclusions made by the researcher.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:9288 |
| Date | January 2012 |
| Creators | Fick, William |
| Publisher | Nelson Mandela Metropolitan University, Faculty of Business and Economic Sciences |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, MTech |
| Format | x, 124 leaves, pdf |
| Rights | Nelson Mandela Metropolitan University |
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