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
Internal policies serve as the backbone of risk management in banking, ensuring that operations are conducted in a controlled and compliant manner. Guaranty Trust Bank (GTBank) has strengthened its operational risk framework through the strict enforcement of internal policies. By implementing rigorous policy enforcement mechanisms, including real-time monitoring systems, periodic audits, and a clear disciplinary framework, GTBank aims to mitigate operational risks and prevent procedural deviations that could lead to financial losses (Eze, 2023). The enforcement process is supported by digital tools that continuously track operational performance and alert management to any breaches in established protocols.
The bank’s approach integrates both technological and human elements to ensure comprehensive risk mitigation. Regular training sessions, transparent reporting, and a culture of accountability have reinforced adherence to internal policies. This robust enforcement mechanism not only minimizes the likelihood of operational errors but also enhances overall governance and regulatory compliance (Okoro, 2024). The proactive stance on policy enforcement builds stakeholder confidence by demonstrating that the bank is committed to maintaining high operational standards and mitigating risks effectively.
This study examines how the enforcement of internal policies influences the mitigation of operational risks at GTBank. It evaluates the effectiveness of current enforcement mechanisms and identifies areas where policy adherence may be improved to further reduce risk exposure, thereby contributing to operational stability and sustainable financial performance.
Statement of the Problem
Despite comprehensive internal policies and enforcement mechanisms, GTBank continues to experience operational risks that lead to financial and reputational damage. One major challenge is the inconsistent application of internal policies across various departments, partly due to integration issues with legacy systems and variability in staff training (Ibrahim, 2023). These inconsistencies result in gaps where non-compliance can occur, increasing the likelihood of operational failures.
Moreover, the rapid evolution of banking operations and external risk factors necessitates frequent updates to internal policies. Delays in communicating these updates and ensuring uniform enforcement across all branches further exacerbate the risk environment (Nwankwo, 2024). Inadequate monitoring and delayed responses to policy breaches also contribute to an increased exposure to operational risks. These challenges undermine the bank’s efforts to maintain robust internal controls and highlight the need for a more cohesive enforcement strategy. This study seeks to identify these gaps and propose targeted interventions to enhance the effectiveness of internal policy enforcement, thereby reducing operational risks.
Objectives of the Study
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To assess the impact of enforcing internal policies on mitigating operational risks at GTBank.
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To identify challenges related to inconsistent policy implementation and legacy system integration.
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To recommend strategies for improving internal policy enforcement to enhance operational stability.
Research Questions
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How does the enforcement of internal policies affect operational risk mitigation at GTBank?
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What challenges hinder consistent policy enforcement across the bank?
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What measures can improve the integration of policy updates and staff training?
Research Hypotheses
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H1: Strict enforcement of internal policies significantly reduces operational risks at GTBank.
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H2: Inconsistent application of internal policies negatively impacts risk mitigation efforts.
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H3: Enhanced integration of policy updates and comprehensive staff training are positively correlated with reduced operational risks.
Scope and Limitations of the Study
This study focuses on the internal policy enforcement practices at GTBank, drawing on audit reports, risk management data, and employee feedback. Limitations include potential reporting biases and the difficulty in isolating internal policy effects from external risk factors.
Definitions of Terms
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Internal Policy Enforcement: The processes and practices used to ensure adherence to established operational guidelines.
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Operational Risks: Risks arising from failures in internal processes, systems, or human factors.
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Legacy Systems: Outdated technological infrastructures that may impede modern enforcement practices.
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Risk Mitigation: Strategies employed to reduce potential losses from operational failures.
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