Risk management and performance of banking sector in Uganda: A case study of private commercial banks

This study aimed at examining the risk management practice of private banks in Uganda and the effect of the risk management practice on the performance of banking sector. Theories related to risk management and performance as put forward by the Basel Committee on banking supervision and other scholars were reviewed. A Combination of positivism and phenomilogical approach was used. A multi-method strategy was used. A representative sample of Eighteen (18) private commercial banks was selected. Data was collected from both primary and secondary sources after which it was analysed. The quantitative data was analysed using SPSS and E-views whereas the qualitative data was analysed using Nvivo.

The results from the survey indicated that private commercial banks in Uganda have well-established policies in risk management. Credit risks, market risks and operations are most risk that affect banking sector as represented by 88.9%, 83.3% and 50% respectively. 69% of banks indicated that they use Standardised approach and stress testing to measure risk. 100% of banks indicated that they establish limit for their risks.

Basing on the findings above, coupled with the findings from previous studies a gap was identified in the performance management of banking sector. A new model was designed which incorporates board of director, business strategy, risk strategy, internal capital and capital allocation was designed.