Effects of Operational Risk Management on the Financial Performance of Micro Finance Banks in Kwara State, Nigeria

Abstract

This study provides empirical investigation on the operational risk management practices and financial performance of micro finance banks in Kwara State. Thus, the specific objectives are to: ascertain the relationship between technology risk management and micro finance banks’ financial performance in Kwara State; and determine the effect of personnel risk management on financial performance of micro finance banks in Kwara State. In order to achieve this, survey research design was adopted with total population of 155 from which 112 were picked as a sample size. Partial Least Square Structural Equation Method (PLS-SEM) was used to analyse the data. Findings revealed that technology risk management and personnel risk management are significantly and positively related to the financial performance of micro finance banks in Kwara State. The study concluded that, operational risk management practices are positively related to the financial performance of micro finance banks in Kwara State. Therefore, the study recommended that management should adopt a new technology, and there should be provision of manual back up in case of system failure for vital document. Moreover, management should increase employment of skilled employees and regular training of existing staff on how to deal with operational risk exposure.