Evaluating operational risk management in commercial banks in Uganda: A case of Commercial Bank of Africa

Abstract

The study was carried out to evaluate operational risk management in commercial banks; a case of Commercial Bank of Africa (CBA) Uganda Ltd. Operational risk management was defined as the risk of loss due to inadequate or failed internal processes, people and systems or from internal events (Basel Committee II, 2004). The study focussed on the level of ORM, challenges and strategies of improving ORM in CBA. Data was collected using the primary means by use of questionnaires that were administered to 55 staff of CBA and was analysed using the Statistical Package for Social Sciences (SPSS version 24). Finding from the study showed that CBA does put measures in place to manage the level of OR. These include business continuity plans, system are closely integrated into the day to day processes, framework in place for monitoring and control of OR. However challenges that CBA was facing include, lack of a comprehensive induction training and refresher trainings to staff, poor adherence to internal controls like audit insurance and dual control increase OR, the organization structure not clear. Strategies that could be put in place include, need to hire and fire employees to minimize fraud, need for a comprehensive policy and procedure in place for approval and monitoring of loans as well as having a technical committee in place where risk issues are discussed and addressed etc. Recommendations include, banks should, identify bottlenecks and develop measures to increase competitiveness by innovation to reduce costs, increase efficiency & tap in unbanked areas, undertake comprehensive training programmes, implement robust credit appraisal, monitoring and follow up of loans, invest in systems & technology aligned to business requirements to ensure maximum benefits while minimising operational risk and governance framework should recognise ORM as a pillar allocate responsibility & accountability in the banks for ORM.