EFFECTS OF INTERNAL CONTROL SYSTEMS ON RISK MANAGEMENT IN COMMERCIAL BANKS IN NAKURU TOWN


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F r e q u e n t r e p o r t s o f f r a u d s i n t h e f i n a n c i a l s e c t o r i n K e n y a e s p e c i a l l y w i t h i n t h e B a n k i n g s e c t o r h a v e b e e n r e p o r t e d o v e r t h e l a s t s e v e r a l y e a r s ( 2 0 0 8 - 2 0 1 4 ) . I n t h e s e c o n d q u a r t e r o f 2 0 1 0 , o u t o f 1 0 2 c o r p o r a t e f r a u d c a s e s r e p o r t e d i n K e n y a , a l l w e r e a s s o c i a t e d w i t h i n a d e q u a t e r i s k c o n t r o l m e a s u r e s b y c o m m e r c i a l b a n k s . E x p o s u r e t o s u c h r i s k s a f f e c t n o t o n l y t h e i r b o t t o m l i n e s , b u t a l s o l e a d s t o s u b s t a n t i a l r e d u c t i o n i n  r e s o u r c e s , s e v e r e d i s r u p t i o n s t o t h e f l o w o f i n f o r m a t i o n a n d c o m m u n i c a t i o n , l o s s o f r e c o r d s a m o n g o t h e r s . T h e p u r p o s e o f t h e s t u d y t h e r e f o r e s o u g h t t o i n v e s t i g a t e t h e e f f e c t s o f i n t e r n a l c o n t r o l s y s t e m s o n r i s k m a n a g e m e n t i n c o m m e r c i a l b a n k s i n N a k u r u . T h e s p e c i f i c o b j e c t i v e s w e r e : t o a s s e s s t h e e f f e c t o f i n t e r n a l c o n t r o l c o m p o n e n t s o n t h e r i s k m a n a g e m e n t o f c o m m e r c i a l b a n k s , t o a s s e s s t h e e f f e c t o f i n t e r n a l c o n t r o l m e a s u r e s o n r i s k m a n a g e m e n t o f c o m m e r c i a l b a n k s , a n d t o i n v e s t i g a t e t h e e f f e c t o f i n t e r n a l c o n t r o l p r o c e d u r e s o n r i s k m a n a g e m e n t o f c o m m e r c i a l b a n k s . T h e s t u d y a d o p t e d a d e s c r i p t i v e s u r v e y d e s i g n . T h e t a r g e t p o p u l a t i o n c o m p r i s e d o f 2 8 C o m m e r c i a l B a n k s i n N a k u r u T o w n . A c e n s u s w a s e m p l o y e d a n d t w o r e s p o n d e n t s p e r b a n k ( o n e f r o m c r e d i t a n d o n e f r o m o p e r a t i o n s d e p a r t m e n t ) w e r e p u r p o s i v e l y s e l e c t e d t h u s t o t a l i n g t o 5 6 r e s p o n d e n t s . D a t a w e r e c o l l e c t e d u s i n g s t r u c t u r e d q u e s t i o n n a i r e s . D a t a w e r e a n a l y z e d u s i n g d e s c r i p t i v e a n a l y s i s b y u s e o f C h i s q u a r e w h i l e C o r e l a t i o n a n a l y s i s a n d m u l t i p l e r e g r e s s i o n w e r e u s e d f o r i n f e r e n t i a l s t a t i s t i c s . T h e r e s u l t s o f t h e s t u d y s h o w e d t h a t i n t e r n a l c o n t r o l c o m p o n e n t s ( r = . 7 2 0 , α = 0 .0 1 ) , i n t e r n a l c o n t r o l m e a s u r e ( r = . 7 4 3 , α = 0 .0 1 ) , a n d i n t e r n a l c o n t r o l p r o c e d u r e ( r = .7 0 1 , α = 0 .0 1 ) w e r e p o s i t i v e l y a n d s i g n i f i c a n t l y c o r r e l a t e d t o r i s k m a n a g e m e n t . M u l t i p l e r e g r e s s i o n a n a l y s i s s h o w e d t h a t i n t e r n a l c o n t r o l c o m p o n e n t s ( β = 0 .4 8 5 ) , i n t e r n a l c o n t r o l m e a s u r e ( β = 0 .1 8 9 ) , a n d i n t e r n a l c o n t r o l p r o c e d u r e ( β = 0 .0 8 6 ) w h e n r e g r e s s e d a g a i n s t B a n k s r i s k m a n a g e m e n t i n

2

N a k u r u T o w n . A d j u s t e d r                                                            w a s 0 .8 7 i m p l y i n g t h a t t h e r e g r e s s i o n m o d e l c a n e x p l a i n

8 7 % o f t h e v a r i a b i l i t y . T h e s t u d y c o n c l u d e s t h a t b a n k i n g i n s t i t u t i o n s s h o u l d s t r i v e f o r t i g h t e r i n t e r n a l c o n t r o l s y s t e m s o n m i t i g a t i n g r i s k s t h r o u g h c o m p o n e n t s , m e a s u r e s a n d p r o c e d u r e s . I t i s r e c o m m e n d e d t h a t a t t e n t i o n b e g i v e n t o t h e s t r o n g i n f l u e n c e s o n t h e i n t e r n a l c o n t r o l s y s t e m s o f c o m m e r c i a l b a n k s w h i l e s t r a t e g i c o b j e c t i v e s a n d r i s k m a n a g e m e n t p o l i c y o f t h e c o m p a n y b e d e t e r m i n e d a t t h e h i g h e s t l e v e l i n t h e o r g a n i z a t i o n a n d s e n i o r m a n a g e m e n t b e r e s p o n s i b l e f o r t h e p o l i c i e s t o b e i n c o r p o r a t e d i n t o d a i l y o p e r a t i o n s a n d t o d e d i c a t e t h e n e c e s s a r y r e s o u r c e s t o a c h i e v e t h i s . F u r t h e r s t u d i e s s h o u l d b e a t t e m p t e d i n a s s e s s i n g t h e r i s k m a n a g e m e n t a n d i n t e r n a l c o n t r o l s y s t e m s i n m i c r o f i n a n c e s i n s t i t u t i o n s ‟ . 

 

EFFECTS OF INTERNAL CONTROL SYSTEMS ON RISK MANAGEMENT IN COMMERCIAL BANKS IN NAKURU TOWN
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    Type Project
    Department Business Administration and Management
    Project ID BAM3774
    Fee ₦5,000 ($14)
    No of Pages 86 Pages
    Format Microsoft Word

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