Assessing the Impact of Risk Management in Reducing the Risk of Financial Institutions in Cameroon.Casestudy Mitanyen Cooperative Credit Union Ltd
Risk management is a rapidly developing discipline and there are many and varied views and descriptions of what risk management involves, how it should be conducted and what it is for. Market risk, in particular, is an area that has received increasing attention in the last decades as financial institutions’ trading activities have significantly grown. This paper examines the link between risk management in financial institutions and their profitability and solvency with special reference to Cameroon and why some of these financial institutions have failed. Over the last two decades, the growth of the finance sector has witnessed the collapse of prominent financial institutions who suffered turbulent economic turmoil as a result of poor risk management both directly and indirectly that saw the banking sector shaken to its roots. The Banking regulatory bodies of Cameroon (COBAC, MINFI, NCC, BEAC, APECAM) have put in place regulations to curb risk in financial institutions which may result from adverse trading conditions causing multiple or major financial institutions to fail. However, the partial supervision of financial institutions by COBAC due to lack of resources only goes a long way to increase the risk faced by financial institutions in Cameroon. Poor implementation and application of these regulations vis-a-vie constant economic changes and challenges points out the flaws in the risk management system of financial institutions in Cameroon. (Mishkin, 2010) explains sound risk management procedures. Risk management is a constant challenge to all financial institutions. Banks need to consistently develop and improve their operational and technical practices. The study adopted correlation research design where data was retrieved from IMF country reports No 09/51 2009, COBAC reports 2011, financial statements of BICEC, CAMPOST, and Credit Froncier du Cameroun. Multiple regressions were applied to assess the impact of liquidity risk on bank solvency. A bank’s success lies in its ability to assume and aggregate risk within tolerable and manageable limits.