The impact of enforcement of internal policies on mitigating operational risks in banking: a case study of Guaranty Trust Bank
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Background of the Study
Operational risk management is vital in maintaining the stability and profitability of banks. Guaranty Trust Bank (GTBank) has implemented strict internal policies designed to mitigate operational risks, including fraud, process inefficiencies, and regulatory non-compliance. The enforcement of these policies is supported by automated monitoring systems, regular internal audits, and comprehensive staff training programs (Oluwaseun, 2023). These measures ensure that employees adhere to standardized procedures, thereby reducing the likelihood of operational errors and fraudulent activities. Enhanced internal policy enforcement contributes significantly to minimizing losses and maintaining operational integrity.
The bank’s approach to internal policy enforcement involves a multi-layered system that integrates real-time monitoring with periodic reviews to detect and address deviations promptly. This proactive stance not only safeguards the bank’s assets but also fosters a culture of accountability and continuous improvement (Adebayo, 2024). Despite these robust measures, challenges remain in ensuring uniform enforcement across all branches and departments, particularly given the complexity of banking operations and the evolving regulatory landscape. This study investigates how the enforcement of internal policies at GTBank mitigates operational risks, assessing both the benefits and the challenges associated with these practices.
Statement of the Problem
Although GTBank has established stringent internal policies to mitigate operational risks, there are persistent challenges that affect their consistent enforcement. Integration issues between new enforcement technologies and legacy systems can lead to gaps in monitoring and delayed corrective actions (Chukwu, 2023). Additionally, variations in staff compliance and resistance to policy changes further undermine the uniform application of these internal controls. The high cost of continuous system updates and training also poses a significant challenge, potentially limiting the scalability of enforcement measures across the organization. These issues contribute to a scenario where operational risks are not entirely mitigated, leaving the bank vulnerable to inefficiencies and fraudulent activities.
Objectives of the Study
- To evaluate the impact of internal policy enforcement on mitigating operational risks at GTBank.
- To identify challenges in integrating and uniformly applying internal policies.
- To propose strategies for enhancing enforcement mechanisms.
Research Questions
- How does enforcement of internal policies affect operational risk mitigation at GTBank?
- What integration and compliance challenges hinder effective policy enforcement?
- Which strategies can improve uniform enforcement and reduce operational risks?
Research Hypotheses
- H₁: Strong enforcement of internal policies significantly reduces operational risks.
- H₂: Integration challenges with legacy systems negatively affect enforcement efficiency.
- H₃: Enhanced training and uniform policy application improve operational risk management.
Scope and Limitations of the Study
This study focuses on GTBank’s internal policy enforcement practices over the past three years, using internal audit reports, risk management data, and interviews with compliance officers. Limitations include restricted access to proprietary data and evolving risk environments.
Definitions of Terms
- Internal Policy Enforcement: The implementation and monitoring of policies designed to manage operational risks.
- Operational Risks: Risks arising from internal processes, people, or systems failures.
- Compliance: Adherence to laws, regulations, and internal standards.
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