IMPACT OF BANKS RISKS MANAGEMENT IN NATIONAL ECONOMY
CHAPTER ONE
BACKGROUND OF THE STUDY
There is no gain saying, the fact that banking business is a sensitive business highly induced with maximum risk from operations to image making among other things.
However, the issue of risk management in the banking sector is gradually, gaining light and the consciousness is on the increase thanks to the global economic meltdown which has to a greater extent exposed the inefficiency of bigger financial institutions to manage risks of their disposal especially that of credit risk. This adduced to the fact why big banks such as the Lehman Brothers went bankrupt, later taken over by J.P Mrgan of Washington Mutual (America’s largest bank)’, take over of Merrill Lynch by Bank of America US Government take over of AIG (World’s largest insurer); the government bail over of Freddie  Mac and Fannie Mac (Key as Mortgage Institutions); and the collapse of Bear Stearns amongst other developments, led to a credit freeze and the current meltdown. In the Nigerian peculiarity, evidence is drawn from the banking recapitalization and consolidation processes of 2005 drastically striking the one time 89 institution (banks) industry to 22 banks. Also, recently is the Central Bank (CBN) exposure of failing banks which will leave the industry having no fewer than four institutions to be rescued.
At the macro level, Nigeria and other Sub – Saharan African countries no doubt, are vulnerable to the effect of global recession although the impact is yet to completely unfold. The fact remains that if financial institutions in this part of the world should take with levity, the issue of risk management and corporate governance, the downfall of bigger financial institutions are inevitable even in the face of the capital market crisis rocking the economy presently which came as a result of banks exposure to the  market. Hence, it is undisputable that failures of most financial institutions world over were attributed to the lax and carefree attitude and the insensitivity of managers to risk management issues at their disposal.
Risk therefore, is a disturbance variable in banking and incidentally can not be avoided as long as operatives (bankers) remain in business wherein. The challenge is not taking without calculation, as the return from such risks will usually be outstanding of successful but devastating if unsuccessful. Upon this note, the chartered institute of bankers of Nigeria (CIBN), through the office of the Director of Consultancy, training and research urged bankers to always identify risks, assess risks and mitigate them.
Moreover, First Bank Nigeria Plc has noted that there has been no systematic banking crisis of the scale witness in advanced economics like the US and Europe, because with the minimal cross border banking system linkages, there is less exposure to complex financial products and financial systems are not well integrated with other global financial markets which have undergone a revolution driven by deregulation, a rapid pace of financial innovation including ask of alternative capital pools and global financial integration to which effect, the crisis continues to unfold itself on the national economy becoming evident in the following areas: striking economy and / or show growth; decline in government revenue, inflation (which pushed up the year – one – year headline inflation rate. .the 15.7 percent in 2010 compared with 6.6 percent at the end of December 2007 thus, adversely affecting the purchasing power of consumer and increasing operating cost, credit crunch, drop in equity market (the general flight to safety and liquidity triggered by the global meltdown led to the withdrawal by foreign investors from over equities market which in turn triggered a bearish trend that saw all share index loosing about 45.8 percent of its value with the market capitalization dropping by N 3.2 billion in 2008 alone) and so on, by this, First Bank Nigerian Plc, has posited variants of risk natures ranging from the characters of operational risk, legal risk, market risk, credit risk etc. its management philosophies as well as procedures.
More so, risk has today assumed different connotation in the everyday usage (Agbona, 2009), stressing that it may be defined as cause of action and sometimes inaction, taken under conditions of uncertainty which exposes one to possible loss. However, in a banking institution, financial risk is the possibility that the outcome of an action could bring up adverse impacts which could either result in a direct loss of earnings or  capital or may result in imposition of constraints on the banks ability to meet its business objectives or even loss a business opportunities. Hence, risk management is a discipline at the core of banking business and encompasses all activities that affect a banks risk profile involving identification measurement, monitoring and controlling of risk (Moye, 2003). Risk management therefore, should be a continuous and developing process and should run throughout the organization which ought to translate the strategy of an organization into tactical and operational objectives assigning responsibility throughout the organization with each manager or employee being made responsible for the management of a component of the risk as part of his job description. This will indeed support accountabi9lity, performance, measurement and reward thus, promoting operational efficiency at all levels.
1.1.2    STATEMENT OF THE PROBLEM
This under study, tend to proffer a headway for the following puzzles in risk management in banks.
(a)    Are there established risk management policies and procedures, articulated, documented and entrenched in Nigerian banks?
(b)    Does every party involved in the risk process, adhere strictly in these policies and procedures?
(c)    Does the risk management process provide for close analysis and mentoring of the dynamics of operating environment with a view to evaluating their impact on the banks past, present and future risk decisions?
(d)    Are the banks risk managers adequate in number, efficient in training and experience in meet challenges of the market that is both highly competitive and affected by recession and technology?
(e)    How relevant is risk return consideration factors in the operations analysis process of Nigeria banks?
(f)    Do Nigerian Banks have any known standard risk acceptance criteria peculiar to the bank concerned or perhaps the banking industry?
(g)    Are there, well articulated risk – rating system and format that ensures consistency in the evaluating existing and prospective risk portfolio?
(h)    What roles does the prudential regulations play in enhancing banks risk management system?
(i)    Are there lapses in the risk management process of Nigerian Banks today and what possible suggestive remedial measures should be taken?
(j)    If there is a direct relationship between banks’ risks and financial crisis.
OBJECTIVES OF THE STUDY
    In a bid to explore the realism inherent in risk management of Nigerian banks, this study posits the following as purposes of the research work:
(a)    Indentify risk management processes adopted by Nigeria banks.
(b)    Establish the degree of entrenchment and adherence of such polices by risk managers in the banks
(c)    Identify whether inherent risks are commensurate with return through appropriate pricing of the facility which should be a function of facility (enterprise) risk rating.
(d)    Ascertain the role of government at enhancing banks risk management process through its relevant regulatory authorities.
(e)    Determine how Nigerian Bank balance the challenge of providing expenditure service delivery to customers with thorough and prudent bank management process especially given the threat that exist from environment, company, and investment analysis.
(f)    Assess the capacity of Nigerian Bank risk management process in provide for close analysis and monitoring of the dynamics in the operating environment with a view in evaluating their impact on the banks past, present, and future risk trends.
(g)    Identify shortcomings and suggest corrective measure to the banks risk management process in a bid to enhance the banks overall quality.
1.3    THE RESEARCH HYPOTHESIS
    In reflection of the possible relationship of factors causing and / or enhancing risk as well as those being affected by risk, the following inferences are thus noteworthy
(a)     HA:    Inadequate management of banks risk is responsible or financial crisis in an economy.
HO:    Inadequate management of banks risk is not necessarily responsible for financial crisis in an economy.
(b)    HA:    Inadequate prudential regulations from government authorities necessitate banks risk consequences.
HO:    Inadequate prudential regulations from government authorities does not necessitates banks risk consequences.
1.4    SIGNIFICANCE OF THE STUDY
Moye (2003) in reflection of the unovermphaizable need for concerned parties in the Nigerian Banking industry to identify, assess and mitigate risk inherent in banking business and operations posits the following:
(a)    The differing natures of banks
(b)    The variant degrees of bank risk
(c)    Measurability of bank risk through adequate assessment procedures
(d)    Measures of mitigating banks risks effects on national and global economics respectively.
(e)    The best practical of banks risks, it indulgence, safety meets optioning as is obtainable. With this on hand, it is expected that the numerous bank failure, economics and financial crisis rocking nations and the world, and Nigeria in particular are short – lived, hence, enhanced banking service quality of an abruptly reduced risk encumbrances is the focus of this study. In further more of the relevance of this study, exploration will be adequately given to the highlighted points above.  
This study shall be relevant and useful in the following area; of bank management, financial regulation by necessary regulatory authorities, economic management of cetera hence, bank management and staff, CBN and offices of financial and economic planning of states and federal government art as well agents of financial transactions. All these and sundry will find the work more than useful in their obligators.    
1.5    SCOPE AND LIMITATION OF THE STUDY   
    This study in its bid to effect its reality, focuses firstly on the Nigerian banks with particular interest in first bank Nigeria Plc, a fore leading bank in the country especially for its risk management and risk disclosure, more so, the study is directed to utilize extensively. The information from the annual report of first bank Nigeria Plc in 2010 as well at its publication of risk management disclosure in 2010. In addition, the study explore the possible dimension of risk evident in Nigerian banks and their peculiarity.
    Despite the rigorous work carried out on this salient issues in Nigerian banks, this study as presented lends to the bedeviled by some sort of shortcomings that necessitate limitations on the level of accuracy, adequacy and reliability.
(a)    The use of one bank as a case study notwithstanding the high pedigree of First Bank of Nigeria Plc in the industry which aids the drawing of a reasonably fair inference from this work on risk management systems in Nigerian Banks.
(b)    The inadequacy of relevant literature as well as inappropriate documentation of data thus,  adding to the inefficiency of data generation.
These weaknesses however, are seem to be occasioned to this degree by time and financial constraints literature and inevitable in the course of carrying out his study.
(c)    Time factor is a big hindrance to an elaborate and wider expiration and exploitation of the subject matter, as this study is carried out within just a semester which is barely few months.
(d)    The investigation depends on the limited literature available on the topic.
(e)    Lack of adequate fund is another factor which hinders the smooth running of this study as fund available to the researcher will not be enough to go deeper into the subject matter.
(f)    Lack of assess to relevant data by the First Bank of Nigeria Plc constitute a problem.
1.7    DEFINITION OF TERMS
RISK: probability that a  hazard will turn a disaster.
RISK MANAGEMENT: is the identification assessment, and prioritization of risks followed by coordinated and economical application of resources to minimized, monitor, and control the probability.
BANK: An establishment authorized by a government to accept deposits, pay interest, clear checks make loans, act as an intermediary in financial transactions, and provide other financial services to its customers.
FINANCIAL INSTITUTION: An institution which collects fund from the public and places them in financial assets, such as deposits, loans and bonds, rather than tangible property.
COMMERCIAL BANK: An institution while accepts deposits, makes business loans and offers related services to customers
ECONOMIC MELTDOWN: A decline in financial and economic activities.
LIQUDI ASSET: These are asset that are easily convert with cash e.g deposit.
ASSET BASE:U  The underlying assets giving value to a company, investment or loan
COPORATE GOVERNANCE: Company management techniques and processes in general or the way a particular company is managed.
REFERENCES
Central Bank of Nigeria (2008): Annual report and financial statement Abuja.
Dorfman, M.S. (2008): Introduction to risk management and insurance,  new Jesey, person education international.
Garuba, A.O. (2008); Fundamentals of banking  Vol. 1. Benin City: Ambik press Ltd.
Holand, J.B. (1986): International financial management; London; Black well.
Nigeria Deposit Insurance Corporation, (2007), Annual report and statement of account. Abuja.
Analo, C. (2009): Lax credit administration, non – adherence to credit management policies The Guardian, October 9th, pg 21 – 22.
Obanla, O.B.A (1989): Loan syndication in Nigerian Money Market, Business time September 25th, Pg 8 – 9.
Ugwu, E. (2009): CBN: Time for self appraisal; the guardian October 14th, Pg 23 – 24.
Whiting, D.P. (1986): Workout Elements of Banking: London, Macmillan.