Abstract
Purpose: The purpose of the study was to determine the effect of operational risk management practices on the financial performance in commercial banks in TanzaniaMethodology: The research problem was studied by use of a descriptive research design. The population of the study consisted of all commercial banks in Tanzania. The study used the sample size of 34 commercial banks in Tanzania. Therefore all the commercial banks participated in equally. Questionnaires were the primary data collection tool in this study. The data gathered from the respondents shall be analyzed and presented using descriptive statistics.Results: The study found that the three independent variables in the study credit risk, Insolvency risk and Operational efficiency influenced the financial performance for the period under study. Credit risk Insolvency risk and Operational efficiency influenced commercial banks financial performance for the period of study.Unique contribution to theory, practice and policy: This study therefore recommends that the commercial banks should handle their operations appropriately as the changes in the factors like Insolvency and Credit risk bring about an effect on the profitability of commercial banks hence affecting their financial performance
Highlights
1.1Background of the StudyCommercial banks like other corporations are established so as to maximize their shareholder wealth
It can be noted that the three independent variables (Credit risk, Insolvency risk, and Operations efficiency) had varying degrees of effect on the financial performance of commercial banks in Tanzania
The study concludes that Credit risk influences the returns of commercial banks Tanzania positively
Summary
Commercial banks like other corporations are established so as to maximize their shareholder wealth. Wealth is the function of risk and return. As well as in many commercial activities if one wants to achieve higher rate of return on average, one often has to assume higher risk. Commercial banks are in the risk business. In the process of providing financial services, they assume various kinds of financial risks. The risks differ in their natures and occurrences pertaining to different business activities. That is to say that certain risk is particular in their natures that affect the operations of banking industry (Young, 2012)
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