Effectiveness of risk management strategies in financial sustainability of finance companies in Nepal

Abstract

This study explores the effectiveness of risk management strategies and their impact on financial sustainability, focusing on five prominent financial institutions: ICFC, MFIL, NFS, PFL, and GFCL. In an era marked by increasing uncertainties and dynamic market conditions, understanding how these institutions manage risks is critical for ensuring their enduring financial health. The research employs a comprehensive approach, incorporating diverse risk management frameworks, including Agency Theory, Resource-Based View, Stakeholder Theory, and Dynamic Capabilities Theory. The investigation aims to assess the alignment of risk management practices with the unique characteristics of each financial institution, considering their industry dynamics and boarder environmental context. The study employs a mixed-methods research design, incorporating both quantitative analyses of financial performance indicators and qualitative assessments of risk management processes through interviews and document analysis. The findings contribute to the existing body of knowledge by shedding light on the efficacy of risk management strategies employed by ICFC, MFIL, NFS, PFL, and GFCL in mitigating financial uncertainties. The research also explores the role of stakeholder expectations, regulatory compliance, and strategic adaptability in shaping risk management effectiveness. Recommendations stemming from the study offer insights for refining risk management practices to enhance financial sustainability across the financial institutions under scrutiny. This study is not only instrumental for the institutions under investigation but also provides valuable insights for the boarder financial sector. As financial institutions play a pivotal role in economic stability, understanding the nuances of risk management and its effectiveness is crucial for fostering a resilient and sustainable financial landscape