Risk Management In The Nigerian Financial Institution

Project and Seminar Topics with material for Banking and Finance

Project and Seminar Topics with material for Banking and Finance


Abstract


The aim of this study was to examine the impact of risk management in the banking sector of the Nigeria financial institutions. The study started with an attempt to state the problem that motivated the study, which financial institutions

Risk management was into the banking sector to help recluse the risk of systematic failure and avoid the disruptions caused by the financial crises in banks. The study there for, was done to access critically its impacts on Nigeria financial institution

The method for data collection was by questionnaire, we also made use of primary and secondary data fifty one questionnaires were administered, forty two were property tested with the use of chi –square (x2) statistical tool and the entire three nall hypothesis were rejected. We could conclude there fore, that there is a positive relationship between risk management and the dependent variable, namely prudential banking credit portfolio of banks and banks liquidity.

The feelings indicated that financial institutions eg. Banks now take minimized and calculated financial risks as a result of the impact of risk management

And it also medicated that confidence and stability have been restored in the banking sections as a result of the strict risk management regulations

The following recommendations among others were made that the center bank of Nigeria (CBN) need to ensure regular examination of banks so that problem of systematic financial risk could be detected early before the situations gets out of hands

Banks and other financial institution should as much as possible, employ qualified risk managers and staffs. Banking edacities is the aspect of risk management should be encouraged.


Chapter One


Introduction

1.1 Background of the Study

In recent times, there is a global unpredictably and sharply business environment which also affect Nigeria. It is becoming more and more to establish and sustain a reliable cutting edge that is certain to win at times and keep our financial institution progressively afloat. This is because the present business environment is so slippery and confusing that is can rightly be described as staccato or scrambled-egg socio-economic mine’ that is characterized by too many mercurial changed. To worsen the situation for the modern mangers, these change do not only come too frequently or two fast, but come in quantum that makes them very difficult to quickly and properly comprehend, control and mange.

No sooner, as the managers are still to get used to, and properly mange one change, another is added to it. For instance, while mangers are still setting down to deal with the business requirements like commercialization, privalization, deregulation, re-engineering, integration or mergers, others such as globalization, internationalisation information technology, universal banking emerged. These changed come with unique demands or influences for the modern managers and modern corporate entry. They do not consider whether one is operating in a developing country like Nigeria, because of their notorious harsh political, economic and policy environment.

History and scholars? Remarks shows that universal banking (UB) and the insurance industry have become current debate and or household discussion among the financial attracted clamour for a level playing field between merchant and commercial banks as well as persistent demarcation banking practice as stated in the year 2000monetary policy circular.

The idea of universal banking came to focus in about 1997, when sectors of the banking industry began to advocate the adoption of universal banking. At the inception, the pace-setters where merchant. Bankers that felt marginalized by legislation from equal “business jokes’ with the commercial bankers. They felt universal banking will create a level playing ground that will enable them receive deposits and ultimately make more profit. Soon the financial industry got engulfed in controversy over universal banking, thus dividing the financial industry into two camps.

At one camp ere the banks that hinged their clamour for universal banking on global financial liberation in which Nigeria could not afford to be left out while other camp where the insurance practitioners who felt threatened by the introduction of universal banking. They debated that universal banking will enable banks to encroach into the insurance industry to the detriment of insurance practitioners. The debates built on ‘pros cons’ on this issue were dragged to media channels, conferences and workshops. This attracted the Central Banks of Nigeria (CBN) who secured to have succumbed to the pressure from the proponents of the universal banking by giving approval in principles in the first quarter of 1999 for the adoption of universal banking in Nigeria. In December 1999 a committee was set up with members drawn from Central Bank of Nigeria (CBN), Nigeria deposit insurance corporation (NDIC), security and exchange commission (SEC), NAICOM and some selected banks and deposit houses. They were mandated to immediately draft, relevant guidelines for the adoption of universal banking in Nigeria.

Following the ratification of the report and recommendations of the committee on the preparation of guidelines, the governor of the central Bank of Nigeria approved the issuance of the said guidelines to all banks for the implementation of universal banking with effect from 1st January 2001.


1.2 Statement of Problems

  1. The policy of diversifying traditional function of merchant banks to that of commercial banks continue to create problems pf uneven business compromised between the banks and insurance companies.
  2. The introduction of universal banking by CBN for environment such as Nigeria has established a platform for business scramble/encroachment and destruction of healthy economy among bankers and insurers.
  3. In any financial system in which universal banking is practiced, licensed deposit of traditional banking system trespasses into insurance underwriting portfolio management, equipment leasing, and insurance trusteeship. This is indirect means of creating uncondusive environment for the underwriters.
  4. This is also seen as creating situation for the modern organization managers aspiring to meet the demands and challenges from the inescapable changes to constantly gird up their lions with the cut-throat competition which the encroachment by the bankers into the insurance market have brought.
  5. The increasing trade liberalization and financial deregulation are dregs of Nigerian financial seeking economic globalization with developed and economically rooted nations.
  6. Only effective and efficient mastery and application of intensive and aggressive marketing strategies is a sure way which will help insurance companies to meet with the demand and challenges of change posed by the new universal banking generation.

1.3 Objective of the Study

The objective of the study is as follows

  1. To determine to what extent universal banking will contribute to the growth, expansion and sales / purchases of insurance product (policies)
  2. To find out how effectively universal banking will enable banks institution undertake insurance underwriting and sales of insurance policies.
  3. To know the guidelines on universal banking and how they will help the insurance regulatory bodies to regulate and control the activities of banking industry.
  4. To know how the universal banking and insurance industry can work harmoniously and effectively in a developing Nigeria economics environment.
  5. To determine the effects of universal banking on insurance industries in Nigeria.
  6. To know the position of the insurance companies in the era of universal banking
  7. To identity workable tools, measures and modalities put in place to ensure insurance companies survival and sustenance in universal bank market
  8. To determine the extent to which investment, savings, economic and social development can be realized from the parallel operation of universal banking and insurance services in Nigeria.
  9. To present suggested solutions/ recommendations to problems and other factors affecting the successful marketing of insurance clamour.

1.4 Research Questions

  1. What is universal banking?
  2. To find out how effectively universal banking will enable banks institution undertake insurance underwriting and sales of insurance policies.
  3. To know the guidelines on universal banking and how they will help the insurance regulatory bodies to regulate and control the activities of banking industry.
  4. To know how the universal banking and insurance industry can work harmoniously and effectively in a developing Nigeria economic environment.
  5. To determine the effects of universal banking on insurance industries in Nigeria.
  6. To know the position of the insurances companies in the era of universal banking.
  7. To identify workable tools, measures and modalities put in place to ensure insurance companies survival and sustenance in universal bank market
  8. To determine the extent to which investment savings economic and social development can be realized from the parallel operation of universal baking and insurance services in Nigeria.
  9. To present suggested solutions/ recommendations to problems other factors affecting the successful marketing of insurance policies in the atmosphere of universal banking scramble for insurance clamour.

1.5 Research Questions

  1. What is universal banking
  2. To what extent will universal banking improve insurance companies?
  3. Can universal banking cause distress in insurance companies?
  4. What are the effects of universal banking on insurance operations and entire economy.
  5. What are the marketing strategies to be adopted by insurance companies to ensure uniqueness in insurance services to win challenges posed by the introduction of universal banking?
  6. What are the governmental policies that will ensure conflict – free operation between universal banking operators and insurance companies?

1.6 Research Hypothesis

  1. H0. Universal banking will not help expand the scope of enlightenment and education of the society on the importance of insurance in Nigerian economy but rather contribute to death of insurance market.
    Hi. Universal banking will help expand the scope of enlightenment and education of the society on importance of insurance in Nigerian economy and enlarge the market.
  2. H0. The introduction of universal banking will not encourage the marketing and purchase of insurance polices.

1.7 Significance of the Study

The significance of this study include

  1. To proved information that will help insurance managers / professionals develop and improve on new marketing strategies to face the challenge of universal banking.
  2. To provide basic information on the importance of universal banking, its operation, effects on the insurance industry.
  3. To form a cardinal view for further researcher study by scholars.
  4. To provide suggestions to avert problems to conflicts that might arise between bankers and insurers.

1.8 Scope and Limitation of the Study

The researcher earlier has the intention of covering most of the insurance companies in Nigeria however time and financial constrains have hindered this intention. The study is therefore limited to NICON insurance PLC Enugu branch. It is believed by the researcher that the method used by insurance closely approximate the general practices extracted from NICON.

The researcher was also constrained by time factor. This is in view of the schools academic curricula which demand that the project work be carried along side with class work.


1.9 Definition Of Terms

1. Agents

An insurance intermediary one who solicits, negotiations and effects contracts of insurance on behalf of insurance within a defined limit of authority and subject to statutory and common laws. An agent may be full time employee of an insurer or as appointed on a part time basis.

2. Banker

A person corporate or persons named bankers licensed for deposit taking institution engaged in receipt of money (deposits) from the depositor and payment of the same to the demand with or without interest charge.

3. Broker

An insurance company’s authorised representative who offer advice and professional help in arranging insurance business on behalf of their client.

4. Claims

The demand made by an insured for payment of benefits or indemnity following a lose in accordance with theme of an insurance contract.

5. Indemity

The exact financial compensation made by an insurer to an insured after a loss has occurred.

6. Insurer

A person named insurance company that is undertaking to provide an indemnity pecuniary benefits or render services

7. NICOM

National insurance commission the body that regulates the activities of insurance companies. Polices – insurance marketable products.

8. UB

Universal banking. Universal banking – All purpose banking.

9. Underwriting

Assessing a risk and deciding the premium and other terms to be applied. This is done by an underwriter.


Chapter Five


5.0 Summary of Findings, Recommendation and Conclusion

5.1 Summary of Findings

In carring out this research work on universal banking and the insurance industry; the researcher was able to come up with the following findings; that

  1. With the introduction of universal banking there will be an insurance in the number of insurance companies in Nigeria.
  2. Insurance professionals should be attracted to the banking services due to the banks better pay package
  3. Insurers may loose their customers to banks because of non or late settlement of claims, or that the customers may wish to have change of transaction of their businesses.
  4. There will be depletion of turnover and profit of older insurance
    organization

5.2 Recommendations

In order for insurance companies to compete favourably with their bankers counterpart and to meet with the challenges posed by universal banking, the following should be adopted.

  1. They should understand that there is a concept that is called universal insurance which requires insurance and insurance organisations who generate fund to invest such directly to the market and not through the bank such organisations are also required by the concept to unit and set up banks and for those that are strong enough to up their own banks and investment companies.
  2. Insurance companies should adopt aggressive marketing strategies to compete with the banks. This can be done by development of an integrated system of marketing activities in selling their policies.
  3. Insurers should review the salary package of their staff to a comparative level with the bankers
  4. Workshops, seminars and staff training should be organised by insurance companies concerning universal banking as to guarantee success in the management of the insurance company
  5. There should be adequate computerization of all operations to run in the insurance to enhance company’s information technology as in NICON and in other insurance industry as a whole.

5.3 Conclusion

  1. Although the introduction of universal banking could pose serious challenges banking could pose serious challenges to the insurance industry in Nigeria and its operators in the short run, it will not exterminate the limit of insurance profession. Rather it will only interfere with the insurance industry for the benefit of Nigerian economy.
  2. Underwriters should not be afraid of universal banking but should rather reposition themselves in order to sanitize the public and provide service that would earn them expected international recognition. They should wake up and embrace the global challenges.
  3. Insurance companies should create customers commitment and take advantage of their core competencies in order to provide and enhance service to the consumers.
  4. Insurance should as a matter of fact improve their claim settlement culture to make sure that their customers are carried along.

5.4 Suggestions for Further Studies

I suggest that any person that will research on this topic to find out the following.

  1. If there will be constituted body that comprise of insurance and bankers to monitor the activities of universal banking.
  2. If the universal banking would be enshrined into the insurance decree in future.
  3. If banks will employ professionals to understate their insurance business or that the bankers are the ones

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