A Comparative Study of Risk Management Strategies in Commercial Banks: A Case of Zenith Bank Plc and Guaranty Trust Bank, Sokoto State
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Background of the Study
Risk management is a fundamental aspect of banking operations, ensuring financial stability and regulatory compliance. Commercial banks face diverse risks, including credit risk, operational risk, and market risk, which can impact their profitability and sustainability (Adegbite & Yusuf, 2024).
Zenith Bank Plc and Guaranty Trust Bank (GTBank) are two leading financial institutions in Nigeria with distinct approaches to risk management. Zenith Bank is known for its conservative risk mitigation strategies, while GTBank is recognized for its proactive and technology-driven risk management frameworks (Obi & Adeola, 2023).
Despite regulatory guidelines on risk management, many banks still experience financial losses due to ineffective risk control measures. This study aims to compare risk management strategies in Zenith Bank and GTBank in Sokoto State.
Statement of the Problem
The Nigerian banking sector has faced several financial crises due to poor risk management practices. Regulatory agencies, such as the Central Bank of Nigeria (CBN), have introduced policies to enhance risk management, yet many banks continue to experience financial distress due to inadequate risk control mechanisms (Eze & Hassan, 2024).
While both Zenith Bank and GTBank have implemented risk management frameworks, the effectiveness of these strategies in mitigating financial losses remains unclear. This study seeks to assess and compare the risk management strategies of both banks to determine their effectiveness.
Objectives of the Study
1. To examine the risk management strategies employed by Zenith Bank and GTBank in Sokoto State.
2. To compare the effectiveness of risk mitigation approaches in both banks.
3. To identify challenges affecting risk management implementation in Zenith Bank and GTBank.
Research Questions
1. What risk management strategies are used by Zenith Bank and GTBank?
2. How effective are these strategies in mitigating financial risks?
3. What challenges hinder effective risk management in both banks?
Research Hypotheses
1. There is a significant difference in risk management strategies between Zenith Bank and GTBank.
2. Effective risk management positively influences financial performance in both banks.
3. Challenges in risk management negatively affect the financial stability of Zenith Bank and GTBank.
Scope and Limitations of the Study
The study focuses on risk management strategies in Zenith Bank and GTBank in Sokoto State. A limitation is that risk management practices may vary across different branches and financial institutions.
Definitions of Terms
• Risk Management: The process of identifying, assessing, and mitigating financial and operational risks.
• Financial Stability: The ability of a bank to maintain profitability and operational efficiency despite market fluctuations.
• Credit Risk: The possibility of financial loss due to borrower defaults.
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