Financial risk management practices in Diamond Trust Bank

Abstract

The purpose of the study was to examine financial risk management practices of Diamond Trust Bank basing on the following objectives; to assess the financial risk management practices in Diamond Trust Bank, to examine the challenges of financial risk management practices in Diamond Trust Bank, and to find out best strategies to improve financial risk management practices in Diamond Trust Bank. The study design was cross sectional and quantitative approach that was employed to gain an understanding on Financial Risk Management practices in Diamond Trust Bank. Simple random sampling was used to select respondents from 20 branches of Diamond Trust Bank located in Kampala district. A sample estimation formula by Krejcie and Morgan, 1970 derived 45 participants as a sample size. The study used primary data, which was collected using close-ended self-administered questionnaires. Data was entered and analyzed using Statistical Packages for Social Scientist (SPSS), Frequencies and proportions were obtained to describe the data. Data and was presented using Frequency tables, tables and graphs. Diamond Trust Bank lacks sufficient public knowledge, precise knowledge, and consistency in risk management. Few staff members are not involved in the management of risk and there is no proper process for capturing all source data. Additionally, Diamond Trust Bank does not review and properly document the background and purpose of all complex transactions. It does not keep records on customer identification such as copies or records of official identification documents, for at least 10 years after an account is closed. Furthermore, it does not appropriate measures to make employees aware of internal controls, policies and procedures put in place. It was recommended that Market risk management involve developing a comprehensive and dynamic framework for monitoring, measuring and managing liquidity, interest rate, foreign exchange, and commodity price risks. This should be integrated with the institution’s business strategy. In addition, stress testing can assess potential problem areas in a given portfolio.