The impact of risk management on profitability of banks

Abstract

In the contemporary banking environment, risk management has emerged as a fundamental pillar that significantly influences the sustainability and profitability of financial institutions. Banks operate in highly dynamic and volatile markets, facing a myriad of risks ranging from credit risk, market risk, operational risk, liquidity risk, to regulatory and reputational risks. The ability of banks to identify, assess, and effectively manage these risks determines not only their financial stability but also their profitability and competitive advantage. Over the years, the banking sector has witnessed numerous financial crises and failures, many of which were attributed to inadequate risk management practices