Effects of Risk Management on Financial Performance of Deposit Money Banks in Nigeria

Abstract

Risk management in the banking sector have greater effects on performance of banks, and also on national economic growth and general business development. The study examines the risk management implications on the performance of deposit money banks in Nigeria. Risk management is a core of lending function in the banking industry. So many Nigerian banks had failed in the past due to inadequate risk exposure. The risk management comes from those risks which can lead to underperformance. This study focuses on those risk management practices and bank’s financial performance in Nigeria. Secondary data sourced was based on a 7year progressive annual reports and financial statements of 5 banks and a panel data estimation technique adopted, was found to be positive and significant. Similarly it suggests the higher the managed funds by banks the higher the performance. The study concludes a significant relationship between banks performance and risk management. Hence, the need for banks to practice prudent risks management in order to protect the interests of investors.