RISK MANAGEMENT STRATEGIES AND FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN NEPAL

Abstract

This study is examined the risk management strategies and financial performance of manufacturing companies in Nepal. The main objectives of this study are to assess the risk management strategies and financial performance of manufacturing companies in Nepal, to examine the relationship between risk management strategies and financial performance of manufacturing companies in Nepal and to analyze the impact of risk management strategies on financial performance of manufacturing companies in Nepal. Liquidity ratio (LR), Current Ratio (CR), Capital Adequacy Ratio (CAR) and Credit Risk Ratio (CRR) are the independent variable whereas Return on Assets (ROA) and Return on Equity (ROE) are the dependent variables . Descriptive statistics, correlation analysis and multiple regression analysis were used to present data. The major finding of this study the correlation matrix in reveals intricate interdependencies between financial performance metrics and risk management strategies in manufacturing companies. The significant relationships between ROA, ROE, and liquidity ratios underscore the importance of balancing liquidity management with effective asset utilization and profitability strategies. Notably, the strong positive correlations between credit risk management and performance metrics suggest that firms prioritizing sound credit practices are better positioned to achieve superior financial outcomes. The regression coefficients reveal important dynamics between financial ratios and ROA in manufacturing companies. Conversely, the negative relationship of Capital Adequacy Ratio with ROA. The relationships between financial ratios and ROE in manufacturing companies. The significant negative effect of Liquidity Ratio on ROE suggests the need for careful management of liquid assets to avoid inefficiencies in capital deployment. The Current Ratio also highlights potential risks associated with short-term liabilities that could impede profitability. Conversely, the positive impact of Capital Adequacy Ratio reinforces the necessity for manufacturing firms to maintain robust capital structures to foster financial performance.