Operational risk management in financial services

Abstract

Risk Management avoids significant drawbacks and increases financial performance of banks. Good financial performance rewards employees as well as shareholders for their working environment and investment respectively. The purpose of this study is to examine the impact of non-performing loan ratio, liquidity ratio, capital adequacy ratio, interest spread rate and bank size on return on assets and return on equity of multinational corporation performance. The secondary data was collected from sample banks and examined by applying standard financial analysis and statistical tools. It used the multiple regression analysis to examine the impact of risk management on profitability of Multinational Corporation in Nepal. From the regression outcomes the result found that the result shows that LR, NPLR, spread rate, and CAR have no discernible effect on ROE. Nevertheless, the constant term and size p-values are 0.003 and 0.003 below the significance level of 0.05, respectively. It demonstrates that ROE and ROA is significantly impacted by constant term and size. It is therefore suggested that to enhance financial performance and minimize the risk of non-performing loans in the future, banks must watch very carefully the loans’ performance and analyze thoroughly the clients’ credit history and ability to pay back their debts prior to any approval of loan applications. The researchers recommend that future studies on impact credit influence on banks’ financial performance should consider more independent variables and longer periods of study such as fifteen to twenty years to have more accuracy and generalized results. Also, this research will be valuable for financial analysts, investors, regulatory bodies, economists or any other stakeholders that are taking any relevant decisions.

Key Words: Risk Management, Non-performing loan ratio, Profitability, Capital Adequacy Ratio, Interest Spread Rate