ASSESSMENT OF RISK MANAGEMENT PRACTICE IN ETHIOPIAN COMMERCIAL BANKS

Abstract

This study aimed to assess risk management practices in Ethiopian commercial banks, focusing on both financial risks namely credit, market, and liquidity risks and non-financial risks, including operational, strategic, and reputational risks. A descriptive research design was employed using both qualitative and quantitative approaches, with data collected from 275 respondents across 19 commercial banks using open- and close-ended questionnaires. Participants were purposively selected from departments related to risk management, credit, customer experience, marketing, and strategic planning. Data analysis utilized descriptive statistics mean, frequency, percentage, and standard deviation through SPSS, and results were presented in tables and graphs. Findings indicated that while Ethiopian banks have developed standardized procedures to manage financial risks, there remains a significant gap in addressing non-financial risks, particularly strategic and reputational risks, which are often overlooked in decision-making processes due to limited awareness and poor integration into institutional frameworks. The study recommends implementing a comprehensive risk management system that incorporates strategic and reputational risks into the core banking functions, aligning practices with international standards such as Basel III and ISO 31000, and encouraging the National Bank of Ethiopia to update its regulatory guidelines to include detailed provisions for nonfinancial risks