The effect of enforcement of internal controls on risk reduction in banking: a case study of Guaranty Trust Bank
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Background of the Study:
Internal controls are the backbone of risk management in banking. Guaranty Trust Bank (GTBank) has focused on strengthening its internal control systems to mitigate operational, credit, and fraud risks. Between 2023 and 2025, GTBank reinforced its internal controls through rigorous auditing procedures, real-time monitoring systems, and strict enforcement of compliance policies. These measures aim to ensure that business processes are conducted in accordance with regulatory standards and that potential risks are identified and addressed promptly (Afolabi, 2023; Musa, 2024).
Effective enforcement of internal controls helps to safeguard bank assets, enhance transparency, and build stakeholder confidence. GTBank’s approach includes regular training for staff, the implementation of automated control systems, and periodic evaluations of risk management practices. By ensuring that internal controls are strictly enforced, the bank is better positioned to prevent financial losses and reduce exposure to operational risks. However, challenges such as system integration issues, human error, and varying levels of adherence across departments can compromise the effectiveness of these controls. This study seeks to examine the relationship between robust internal control enforcement and risk reduction, focusing on how GTBank’s practices contribute to a safer operational environment (Ibrahim, 2025).
Statement of the Problem:
Despite GTBank’s enhanced internal control measures, instances of risk exposure persist. Inconsistencies in the application and enforcement of internal controls across different departments have been observed, leading to sporadic risk incidents and operational lapses (Okeke, 2024). These lapses suggest that while the bank’s internal control framework is comprehensive, its practical implementation may be inadequate. Factors such as insufficient staff training, resistance to new procedures, and challenges in integrating advanced control systems with legacy infrastructure contribute to these shortcomings. Consequently, the bank experiences higher-than-expected incidences of fraud and operational risk, which can undermine its financial stability and reputation. The study aims to identify the weaknesses in the enforcement of internal controls and propose strategies to improve risk reduction outcomes.
Objectives of the Study:
To evaluate the effectiveness of internal control enforcement in reducing risk at GTBank.
To identify challenges affecting the consistency of internal control practices.
To recommend measures for enhancing the effectiveness of internal controls.
Research Questions:
How do enforcement practices of internal controls impact risk reduction at GTBank?
What are the main challenges in the implementation of internal controls?
What improvements can enhance the consistency and effectiveness of these controls?
Research Hypotheses:
H1: Strict enforcement of internal controls significantly reduces operational risk.
H2: Inconsistent control practices negatively affect risk reduction outcomes.
H3: Enhanced training and technology integration improve internal control effectiveness.
Scope and Limitations of the Study:
This study focuses on internal control enforcement at GTBank from 2023 to 2025. Limitations include variability in control application across departments and potential difficulties in quantifying risk reduction.
Definitions of Terms:
Internal Controls: Processes and procedures implemented to manage risks and ensure operational integrity.
Risk Reduction: The process of minimizing exposure to financial and operational risks.
Compliance: Adherence to established internal and external guidelines.
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