| dc.description.abstract | The rapid technological innovations in the banking sector, revolutionary advances in information networks, financial deregulation and globalization has opened numerous banks world over to the dangers of operational risk. If commercial banks are not sufficiently prepared to handle operational risk, they are likely to face challenges like high operational losses that negatively impact on their performance. The banking sector in Uganda has grown rapidly since its liberalisation in the early 1990s. However, the sector has faced several challenges such as reported insider-lending, fraud and the closure of up to seven commercial banks in a space of 15 years”. This study aimed at assessing the role of operational risk management in Uganda’s banking sector. The study specifically examined the operational risk management processes of NC bank and how these processes have been effective in mitigating the loss associated with operational risks to the bank.
This research was done using both secondary and primary data. Secondary data were obtained through document reviews of the policy manuals of NC bank, while primary data were collected using self-administered questionnaires, and key informant interviews with selected members of staff in the Operations, Finance and Risk departments of the bank at senior management level. Quantitative results of the study are presented in the form of percentages while the qualitative data was analysed using content analysis based on the study objectives.
Operational risk management tools and processes which were rated as being highly effective included business continuity planning, documentation of process manuals, prompt communication of compliance officers’ findings, as well as staff risk training and sensitisation. Areas where Operational risk management tools and processes were judged to be moderately effective included communication of the Operational risk management policy, establishment of acceptable risk limits, staff involvement in the risk management process and limits to staff information access. The bank had weak performance in three major areas in relation to free flow of information amongst staff and senior management, staff adherence to approved bank processes and procedures as well as delegation of authority in the bank.
From the study results, the bank through its Operational risk management processes has registered a reduction in the number of reported non-compliance penalties from the regulator (Bank of Uganda), it has managed to ably assess the performance of the bank risk controls as well as developing a risk database that is referred to in order to avoid repeat incidents.
To ensure effective Operational risk management, senior management needs to create an environment that encourages open communication between staff and senior management and should also control staff delegation of authority. | en_US |
