1.

0 Title:

Role of risk management on financials performance in banking

institutions.

2.0 Introduction

2.1 Background of study

The importance of risk management has become heightened in todays

competitive economic world. Most of the organizations value will be

affected by the collective risks or threats thus there is no exception to

banking firm too. The primary goal of risk management is to maximize

shareholder value, its claim that risk management become an approach

that adding the value in generating the organizations revenue by giving

an overview of all risky activities, formulate recovery plans and

monitoring the day-to-day operation consistently. (Vincent, 2012)

In the relationship between banks performance and risk management,

most of the banks are listed and generally serves as financial

intermediaries, thus risk management is much concern to them

especially in financial crisis. Therefore, listed banks have been

encouraged to allocate more resources in order to mitigate the risk and

there no doubt may cause a loss due to allocate more resources to risk

management and may affect the sustainability in long-run.

2.2 Statement of Problem

2.3 Research Objectives

 In this study, there are three objectives being established which the first

objectives is to compare the role of risk management of the bank

between developed and developing countries on financial performance.

Next, the second objective of this paper is that to investigate the

relationship between the board of director and efficiency of risk

management of the bank.

The third objectives of this study will be to investigate effect of CRO

as an independent member of executive board on role of risk

management of the bank on financial performance.

2.4 Research Questions

Throughout all the study, three research question will be focused and

solved which are:

Do bank between developed and developing countries have different

role of risk management on financial performance?

Do board of director will affect the efficiency of risk management of

the bank?

Do CRO as an independent member of executive board will affect the

role of risk management of the bank on financial performance?

2.5 Motivation & significance of study

The finding of this study will contribute to the improvement of the

bank to be more awareness about how a efficiency risk management

will influence the financial performance in banking institution and let

them know about risk management is playing an very important role in

 financial performance today. The study represent how board of

director affect the efficiency risk management that can help the bank

institution to create the best decision and also leading to a good

financial reports. I hope that this research will encourage the bank

institutions either in developed countries or in developing countries to

train an intelligent and capable Chief Risk Office as independent

member to manage the its risk management. By this way, it can reduce

the risk and bring benefit to their investors due to the reliability of

those bank

4.0 Research Methodology

4.1 Conceptual Framework

Risk Management

- existence of CRO in BOD

- dedicated committee solely charged
- Board size
- Board independence
- Percentage of directors with experience Bank Performance

4.2 Research Hyphothesis

The hypothesis for this paper is based on the following assumptions:

H1: There is a relationship between CRO as a member of executive

board and bank performance of each bank in developed countries and

developing countries.
H2: There is a relationship between risk committee and bank

performance of each bank in developed countries and developing

countries.

H3: There is a relationship between board size and bank performance of

each bank in developed countries and developing countries.

H4: There is a relationship between bank independence and bank

performance of each bank in developed countries and developing

countries.

H5: There is a relationship between percentages of directors with

experience as an executive officer and bank performance of each bank

in developed countries and developing countries.

H6: There is a relationship between bank performance and bank

performance of each bank in developed countries and developing

countries.

4.3 Data Collection Procedures

Secondary data was collected from annual reports of each commercial

bank in both developed countries and developing countries. We targeted

all 10 banks in certain countries which included Malaysia, Singapore,

Thailand, Hong Kong, Russia, Philippine, Nigeria, South Korea, Greece,

France, Canada and Norway. We collected the data of annual report

2016 from each country.

4.4 Models &Variables

Independent Variables
1) Whether the CRO is a member of executive board

2) If the bank has a dedicated committee solely charged with monitoring

and managing the risk management efforts within the bank

3) Board size, measured as the natural logarithm of the number of

directors on banks board

4) Board independence as measured by the percentage of independent

outside directors on the board of directors

5) Percentage of directors with experience as an executive officer in a

bank or insurance company

Dependent Variables

1) Bank performance

Models & Variables

Bank performance = 0 + 1 existence of CRO in BOD + 2

dedicated committee solely charged + 3 Board size+ 4 Board

independence + 5 Percentage of directors with experience +

7.0 Referencing and Citation

Aebi, Vincent& Sabato, Gabriele& Schmid, Markus 2012 Risk

management, corporate governance, and bank performance in the

nancial crisis, Journal of Banking & Finance, volume 36, issue 12,

pp. 3213-3226.