ATLAS BUSINESS AND TECHNOLOGY COLLEGE

FACULTY OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

RISK MANAGNMENT PRACTICES AND PERFORMANCE IN ABYSSINIA

BANK WOLKITE BRANCH

By

ASTER ATALO

Major Advisor:

MARCH 2024

Atlas College

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 TABLE OF CONTENTS
TABLE OF CONTENTS 2
1. INTRODUCTION 4
1.1. Background of the study 4
1.2 Statement of the Problem 5
1.3 Objectives of the Study 6
1.4. Research Question 6
1.5. Scope of the Study 6
1.6. Significance of the Study 7
2. LITREATURE REVIEW 8
2.1 Definition of Risk 8
2.2 Classifications of Risk 9
2.2.1 Pure and Speculative Risk 9
2.2.2 Fundamental and Particular Risks 9
2.2.3 Static and Dynamic risks 9
2.2.4 Objective and Subjective Risk 10
2.3 Types of Financial Risks 10
2.1.3 Liquidity Risk 10
2.3.2 Credit Risk 11
2.3.3 Foreign Exchange Risk 13
2.3.3 Factors Affecting Foreign Exchange Market 14
2.3.4 Interest Rate Risk 15
2.4 Risk Management 17
2.5. Importance of Risk Management to the Banking Business 17
3. RESEARCH METHODOLOGY 20
3.1. Research Design 20
3.2. Sample design 20
3.2.1. Target population 20
3.2.2. Sampling Size and Technique 20
3.3. Sources of Data 21

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 3.4. Instrument of Data Collection 21
3.6. Method of Data Analysis 22
4. WORK PLAN 23
5. LOGISTICS 24
6. REFERENCES 25

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 1. INTRODUCTION

1.1. Background of the study

The Banking sector has a pivotal role in the development of an economy. It is the key driver of
economic growth of the country and has a dynamic role to play in converting the idle capital
resources for their optimum utilization so as to attain maximum productivity. In fact, the
foundation of a sound economy depends on how sound the Banking sector is and vice versa
(Sharma, 2003).

Risk assessment falls into the overall discipline of risk management. For most organizations, risk
management is an evolving discipline that goes at disparate maturity levels across organizational
disciplines such as internal audit, business operations, and information technology and finance.
Risk is defined as the uncertainty of an event occurring that could have an impact on the
achievement of objectives. The definition of risk assessment then follows as the identification,
evaluation and estimation of the levels of risks involved in a situation, their comparison against
benchmarks or standards, and determination of an acceptable level of risk (ISF, 2010).

Risk which is uncertainty loss, poses a problem to business and industrial in nearly every work
of life. Executives, employees, investors, travelers and farers all conformant risk and deal with it
in various ways. One takes risk at the time of travel, when engaged in direct rational activity.
When one work or who one sleep. In general, everyone is surrounded by full of uncertainty, thus
uncertainty is at the heart of risk, and risk management is an instable phenomenon of running a
business concern (Gartner, 2010).

Risk exists when every the future is known as because the adverse effect of risk has plagued man
kind since the beginning of time, individuals, group and society have developed various methods
for manager not by choice but by sheer necessity, although financial and non financial risks in in
the banking business and the systematic approach of handing them was is existence ever since
the emergence of the business. The magnitude of risks faced by new banks entering the market
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made the importance of risk management practice adapted to all the more exigent ( Ernst and
Young, 2009).

This study focuses on the types of financial risks and the management practice adopted to
mitigate the consequences of these risks. By Bank of Abyssina ,the study primary focused on the
various types of financial risks as well as the mechanisms put in place to manage credit risks,
the liquidity risks and finally will turns its attention to the analysis and management of interest
rate, risks, doing so ,the study has titled to explore the role risk management plays in alleviating
the uncertainty of loss characterizing the business of banking to gather with conscious effort
directed at ameliorating their adverse effect on sustainable profitability and the overall stability
of the bank. Eventually the study has also attempted to draw conclusion based on the actual
findings as compared to the internationally acceptable practice of risk management and to come
up with practical solution.

1.2 Statement of the Problem

This world is a full of uncertainty. Thus uncertainty will affect both profits $ not for profit
organization, thus uncertainty will result a risk to the organization. Risk has a variety of
meanings in a business as well as in everyday life. At its most general level, risk is used
describe any situation where there is uncertainty about what outcomes will occur. Life is risky.
In probability and stratifies, financial management an investment management, risk is often used
to in a more specific some sense to indicate possible variability in outcomes. Around some
expected value (Viehaus, 2004;p1).

As a risk is uncertain, it cannot be totally and absolutely controlled, but it can be minimized
using different methods. From those minimized using different methods. From those minimizing
methods risk management practice is the main alternative, risk management process involves
sequential key steps regard less of types of risk.

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 There for, the study will try investigating the risk management system of commercial bank
of Ethiopia in Aksum branch and suggest appropriate solution to the following problem. The
problem in relation in risk management practices Abyssinia bank Wolkite branch.

1.3 Objectives of the Study

The general objective of the study is to assess the risk management practice in Abyssinia bank
Wolkite branch.

Specific Objectives

1. To assess the working and functioning of Abyssinia bank Wolkite branch financial and
speculative risk management practices.
2. To study the risk management planning, policies, and producer techniques of the bank.
3. To evaluate the impact of risk management techniques on the performance of the bank.

1.4. Research Question

Based on the above specific objectives, the researcher will attempt to answer the following
questions

1. What are the working and functioning of Abyssinia bank Wolkite branch financial and
speculative risk management practices.
2. What are the risk management planning, policies, and producer techniques of the bank?
3. What are the impacts of risk management techniques on the performance of the bank?

1.5. Scope of the Study

This study will focus on the assessment of risk management practice in Abyssinia bank Wolkite
branch. It will be better to study the overall role of risk management of all bank branches of
Bank of Abyssinia. The study will conduct only in Abyssinia bank Wolkite branch due budget
and time constraints.

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1.6. Significance of the Study

The study would be contribute much for improving economic welfare of both peoples of the
country and may help the concerned decision makers to understand the risk management
practices, particularly on Bank of Abyssinia in Wolkite Branch. This enables business to reach
its objectives’ and goals effectively and efficiently. In general the finding of this study would be
help to give first hand information for different governmental organization and policy makers to
design and develop appropriate risk management system that taking in to consideration the
effectiveness and success of the bank.

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 2. LITREATURE REVIEW

2.1 Definition of Risk

There is no single definition of risk, economics, behavioral scientist, risk theorists, tacticians, and
actuaries each have their own concept of risk. There for the researcher will try to give different
authors view and definition for the word risk. According to Williams Jr. Risk is a potential
variation in outcomes and the exposure to a potential loss, It can also be defined as uncertainty
about economic losses due to occurrence of an event, economic losses are caused by perils such
as crimes, fire and accidents, It is the possibility of an adverse deviation from a desired outcome
that is expected.

According to Trieschman, risk can be defined as uncertainty concerning losses. The risk
surrounding a potential loss creates significant economic burdens for business .Government, and
individuals Billions of Dollars are spent each year on strategies for financing potential losses.
But when loses are not planned for in advance, they may cost even more. Business as well as
individuals may try either to avoid risk as much as possible or to reduce risk, the opportunity cost
activities forgone due to risk considerations ,expenses of strategies to finance potential loses and
the cost of an reimbursed losses. (Willies, Jr,L Smith and others, mccolo hill 1998,8 th edition
page 15) ( Thichmann, James and custaoun, scndard publishing 1998,10th edition, page 5)

Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome
that is expected or hopes for. The individual hopes that adversity will not occur, and it is the
possibility that this hope will not be met that Constitutes risk, risk is potential variation in
outcomes. It is when there is uncertainty about the occurrence of a loss that risk becomes an
important problem.

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2.2 Classifications of Risk
2.2.1 Pure and Speculative Risk

Pure risk is a type of risk exists when there is chance of loss but no chance of gain. For instance
the suffer the owner of a car faces risk of collusion loss, if collusion occurs, he will suffer a
financial loss, if there is no collusion he will not be benefited. But speculative risk is a type of
risk exists when there is a chance of gain as well as a chance of loss, pure risks are always
distasteful but speculative risks posses some alternative features. It exists when there uncertainty
about an event that could produce either a profit or loss. An Ina situation involving speculative
risk the society may be benefited even through the individual is hurtled. (Triecheman, Jems and
Custavom, Sandra G. p-5)

2.2.2 Fundamental and Particular Risks

A fundamental risk is risk that affects the entire economy or large number of persons or groups
within economy. It involves on losses that are impersonal in origin and consequence and they are
group risks mostly caused by economic, social and political phenomena, on the other hand
particular risk is a risk that affects only individuals and not the entire community. It involves loss
that arises out of individual events and is felt by a single individual rather than by the entire
group. (Ibid)

2.2.3 Static and Dynamic risks

Static risks are those risks, which would occur even if there were no changes in the economy.
These risks include losses caused by the regulation of the force of nature or human errors. On the
other hand, dynamic risks are those risks resulting from changes in the economy. Changes in the
price level, consumer tastes, income and out puts, and technology may cause financial losses to
member of the economy. These are risks related with changes in human wants. Although these
dynamic risks may affect a large numbers of individuals, they are generally considered loss
predictable than static risks, since they do not occur with any precise degree of regularity.
(Triecheman, Jems and Custavom, Sandra G. p-3)

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2.2.4 Objective and Subjective Risk

Subjective risk refers to the mental state of an individual who experiences, uncertainty doubt or
worry as to the outcome of a given event. It is essentially the psychological uncertainty that
arises from an individual’s state of mind .On the other hand objective risks are defined as the
relative variation of actual fro expected losses. It is mainly applicable to group of objectives
exposed to losses, refers to the variation that occurs when actual loss differ from expected losses.
Objective risk can be statistically measure by so measure of dispersion as the standard deviation
or efficient of variation. It is an extremely use full concept for an insurer or corporate risk
manager. Objective risk can be statically measure by some measure by some measure of
dispersion as the standard deviation efficient of variation. It is an extremely useful concept for an
insurer or corporate types of risks manager. (Triechman james and custovan, sondar & bublishing
1998, 10th edition, page 13)

2.3 Types of Financial Risks

Financial risks, which this study specifically deals with, in the comprise two types of risks. Pure
5risk including liquidity, credit and solvency risks-can result in loss for a bank if they are not
properly managed. Speculative risks based on financial arbitrage, can result in a profit, if the
arbitrage is correct or a loss if it is in correct. Financial risks are subject to complex
interdependencies that may significantly increase a bank’s overall risk profile. For example bank
engaged additionally to liquidity and interest rate risks if the bank carries open positions.
(Greuning, Hnnie Van (and) Bratanovic, Sonja Brajovi. P-4).

2.1.3 Liquidity Risk

Liquidity risk is a condition of an individual or business where in a high percentage of the assets
can be quickly converted in to cash without involving any considerable loss by accepted sacrifice
prices. Liquidity implies a high degree of current ness and solvency in the equity sense, the
ability of current assets will be able to meet current liabilities as they mature. Liquidity risk can
also be defined as uncertain future out comes that either improve or worsen the present liquidity
position of the company. It may mean that holding idle cash on one hand or failure to eat

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financial commitments when they are due on the other holding idle cash is costly to say the least
where as failure to meet the financial commitment may imply demise the worst case scenarios.
Therefore the purpose of liquidity risk management is to help the bank project to the worst
scenarios meet its financial commitment at a minimum cost. (Greuning Hennie van and
Brantnovic, sonid Rajovic WB 2003, 2nd edition, page 4)

Fund mobilization, fund application, quality service, branch and application of new technology
are the critical issues that can be emphasizes by management in minimizing liquidity risk fund
raising is not limited to deposit mobilization, borrowing and equity contribution are other
sources of fund raising .These are dependable sources of fundraising, which are attainable even
in times of adverse circumstance to insure dependable risk weight asset ratio. Branch network
expansion is another critical issue that contributes to the broadening of customer base because it
helps to attain the desired level of growth and to avoid the excessive dependence on particular
sources. Thus, monitoring both funding mix and the concentration of depositors help to control
and mitigate unnecessary exposure to liquidity arises and avoid the vulnerability associated with
such satiation. The current problem in Abssinya bank is excess liquidity due to the prevailing
poor credit appetite and the very limited investment opportunity in the economy. Periodic and
continuous assessment of liquidity position of the bank can be a solution for these problems. In
general the crucial strategic issues within which liquidity risk management is un imaginable are
fund mobilization ,credit allocation (fund application) ,expansion of branch networks and the
prevision of quality services through application of new and appropriate technology. (Ibid)

2.3.2 Credit Risk

Credit risk is defined the chance that debtor will not be able to pay interest or repay the
principal according to the terms specified in a credit agreement, credit risk means that payment
may be delayed or ultimately not paid at all which can intern cause cash flow problems and
affect a banks liquidity . It exists in both banks on balance sheet accounts. ( Greuning Hennie van
and Brantnovic, sonid Rajovic WB 2003, 2nd edition, page 14-16)

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2.3.2.1 Types of Credit Risk

Credit risk, which that is the risk that the borrowed will default, can occur in different forms
are:Direct lending risk, the risk that actual customers obligations will not be repaid on time,
which exists for the entire life of the transaction. Contingent lending risk: the risk that a potential
customer’s obligation will become actual obligation and will not be paid on time. It occurs in
products ranging from letter of credit and guarantees, which exists still for the entire life of the
transaction. Documentation risk: the risk that documentary evidence which depend on to enforce
our rights under conducts, may not be complete, correct or inferable for loan to be repaid.

2.3.2.2 Causes of credit risk

A bank is successful when the risks are reasonable, controlled within its financial resources and
credit competence. The vital issues for preservation of the quality of loans are existence of a well
developed policies and procedures, strong portfolio of management, effective credit controls and
the most critical element of all well trained staff that is qualified to implement the system.
Conversely ,absence of adequate guidelines to monitor administration of the lending function
pave the way for the occurrence of substantial amount of problem on loans. Therefore there
many causes for the occurrence of credit risk. Some of these are: (Abyssinya Bank risk
management Addis Ababa. P-4)

Excessive Concern for in Come Growth: the loan portfolio is usually the most important
sources of income. Hence growth of the loan portfolio becomes a local point to boost the revue,
however, too much concern for revenue maximization must not permit extension of weak loans
that carry undue risks, generally, weak loans cost for more than they contribute income for the
bank.

In complete information: character and capacity may be determined using different means.
However, complete credit information is the best acceptable, reasonable, and accurate method
for determining a borrower’s financial standing. Lack of supporting credit information is an
important cause of credit risk. Therefore, adequate and comparable financial statements and
other pertinent statistical data should be available in order to minimize the associated with loans.

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Competition: competition among banks for market and to influence community may result in
the compromise of credit principles and the acquisition of unsound loans in which its ultimate
cost exceeds its temporary gains in growth.

Technical In competence: the ability to analyze financial statement and to obtain and evaluate
other credit information thereby protecting in the placement and supervision of loans in
processed by all qualified and experienced bankers. Hence, the management should seriously be
concerned with the hiring of such employees. In general, controlling the above listed factors and
several others, which impede growth of the bank. Therefore financial offers and management at
all levels should be seriously concerned in order to minimize the occurrence of such risk. (Ibid)

2.3.3 Foreign Exchange Risk

The term foreign exchange refers to the simultaneous purchase of one currency and selling of on
there as currencies are traded in pairs. Foreign exchange risk results from change in exchange
rates between a bank’s domestic currency and other currencies. It is risk of volatility due to
mismatch and many cause a bank to experience losses as result of adverse exchange rate
movements. (Greuning, Hnnie Van (and) Bratanovic, Sonja Brajovi. P-6)

2.3.3.1 Different type of Quotation

Quotation can be made by telephone but the most common forms can make quotations now a day
is on line quotations made by using computer system. Quotations may be taken in the form of
spot, fore ward, hedging and options.

Spot transaction: spot transaction refers to the type of straight. Forward (out ward) exchange of
one currency with the other. The spot rate is the current market price or bench mark price,
settlement of a spot transactions conventionally must be settled two business days after the deal
date.(Greuning Hennie van and Brantnovic, sonid Rajovic WB 2003,2nd edition ,page 6)

Fore ward transaction: refers to the type of transaction where settlement will be done on apre-
agree date, which will fall three or more business days after the deal date. Such quotation takes
spot rate as a base and adjustment will be made taking in to account exchange and interest rate
fluctuations.

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Hedging Transaction: refers to a quotation for getting a fixed rate to day to cover future
commitments so that settlement will be done neither at again nor at a loss in the future vis-à-vis
the local currency. Such quotation takes spot rates as adjustment will be made taking in to
account exchange and interest rate flections.

2.3.3 Factors Affecting Foreign Exchange Market

There are a number of factors that affect a foreign exchange markets influencing the value of
currencies, some of these are

 Change in interest rates of a currency affects the value of currencies in that the arise
interest rates of a currency by raising exchange rate.
 The rate of inflation that is the higher the rate of inflation, in the economy of a country
they lower will be the demand for the currency to result in decrease of the value.
 The country’s economic and political stability have also impact with the demand and
supply of currency ,the local currency will be strong
 National bank intervention’s either in interest rate or exchange rates have an impact on
value of currencies depending on the position taken by such bank.
 The larger the market orders for comedies, services or currencies which prevail in a given
country, the more volatile will be foreign exchange rates depending on the level of
supply.

2.3.3.3 Risk in Foreign Exchange Operation

Risk for different kind and magnitude are expected in any institution, which engages it
international trade as settlements of such transactions involve at least two different currencies
and contracting parties, foreign exchange risk arises from exchanges in exchange rates in relation
to is attached value of assets and liabilities denominated in different currencies and their impact
on local currencies. Foreign exchange by itself and all other activities that require exchange of
currencies are risky by their nature as they necessary rates the activities of measuring ,pricing
accepting when appropriate and managing.

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There are so many factors that affect foreign exchange there by forcing participants to identify,
measure, and manage risk exposures. Risk exposures may result from market risk, transaction
risk, economic risk, transaction risk and settlement risk (Greuning Hennie van and Brantnovic,
sonid Rajovic WB 2003,2nd edition, page 4)

Market risk: refers to exposure to adverse price changes for a dealer, which includes two major
components of exchange and interest rate risk. Exchange rate risk arises from change in value of
currencies at closing moment of trading which will be influenced by the demand and supply of
each currency during a trading session.

Transaction Risk: refers to the price based impact of exchange rate exchange on foreign
receivable and foreign payables. The different in price at which they are collected or paid and the
price at which they are recognized in local currency in financial statements.

Economic Risk: refers to the impact on exchange rate exchanges on a country’s long term or
company competitive position as it may cause decline in imports and larger exports.

Transaction Risk: refers to the impact of exchange rate changes on revolution of foreign
currency position at the time of financial reporting or periodic consolidation of financial
statements.

2.3.4 Interest Rate Risk

According to Edward PIM Gardener, interest rate risk refers to the exposure of an economic unit
to movements in the market rates of interest. It is an important part of banking balance sheet
management system, which is concerned with making the corporate trade-off. Sticking the
correct balance between profitability. Liquidity and capital adequacy or solvency ( Greuning
Hennie van and Brantnovic, sonid Rajovic WB 2003,2nd edition ,page 16).

2.3.4.1 Sources of Interest Rate

Interest rate risk steams from a change of interest rates in the time span between maturities of
assets and liabilities. It could also emeralds from diverse sources and the Major one’s rate:
Reprising risk, yield curve risk, and basic risk.

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Reprising Risk: it is a type of risk that arises from timing differences in the maturity (for fixed
rate) and reprising (for floating rate) of assets, liabilities and off-balance sheet positions.

Yield Curve Risk: it is a smooth curve fitted by eye through a serious of points on a chart
representing the different yields to maturity. As of a particular date, on securities that are
identical and homogeneous in every respect except their maturities. Yield curve risk arises when
unanticipated shifts of the yield curve have adverse effects on banks income or underling
economic value. (Trieschmann. James and Gustavson, Sandra G. p-14)

Basic Risk: when asset payments due are based on one floating rate-index the portfolio
becomes subject to basis risk. In other words basis risk arises from imperfect basic arise from
imperfect basis arise from imperfect correlation in the adjustment of the rates earned and paid on
different instruments with other wise similar representing characteristic. Hence, it is the risk
assumed when assets are based on one floating rate index and liabilities on the other. (Ibid)

Since the financial sector of our country is party regulated, these risks, which are the typical
characteristic of developed economies, are rate phenomena in our case, so that the management
of them cannot be taken as a nerve taking for some time to come. In well–managed bank the
basic objective of the business must be. ( Triechaman , James and Gustvon, Sendera 1998,10 th & 8th edition, page
14)

To pay the shareholders an acceptable dividend.

 To maintain the infrastructure of the business in order to continue its operation.

 To maintain the capital of the business.

Interest rate exposure links with these strategic objectives by insuring they are not defeated by
unexpected movement interest rate which causes un expected set back in profit wind fall. The
exposure to rate movements is dynamic, being affected by enter action of competition, the
economic environments.

Liquidity constraints etc. Thus a change in interest rate and exchange movement liquidity and its
probable impact on profit may only be evaluated by linking the past with the future but not the
short –term profit projections of the bank.

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The first stage in the control of in interest rate exposure is knowledge of what is the exposure,
which should be quantified interns of profit loss or again given. One thing that should have been
remembered here is that control of exposure normally results in reduction of risk.

2.4 Risk Management

Risk management has been defined by different authors based on their area of emphasis and their
attitudes to words their exposure, accordingly the researcher has tried to indicate different
authors view in the following manner. According to Triechman risk management is a managerial
process that involves the executive function of planning, organizing, loading and controlling
those activities in a firm that deal with specified types of risks in order to maximize the value of
an organization. The risk manager is charged with minimizing the value of an organization. The
risk manager is charged with minimizing the adverse impact of losses on the achievement of
the company’s goal. (Grevning Hennic van and Brantnovic, sonja Rajovic WB 2003, page 17)

Risk managements is a scientific approach to dealing with pure risks by anticipating possible
accidental losses and designing $ implementing procedure that minimize the occurrence of losses
or the financial impact of losses that do occur. It is a systematic process for the identification and
evaluation of pure loss implementation of the most appropriate techniques for treating such
exposure. It focuses on a part of the total bundle of risks, those that are classified as “pure risk”
as a general rule, the risk manager is concerned with the management of pure risks ,not
speculative risk and all pure risks are considered ,including those that are uninsurable . Hence,
risk management is the identification, measurement and treatment of property, liability and
personnel pure risk exposures. (Greuning Hennie Van(and)Bratanovic, Sonja Brajovic. P-17)

2.5. Importance of Risk Management to the Banking Business

Risk exists whenever the future is unknown because the adverse effect of risk played making
since the beginning of time. As a result accidental losses each day threaten the survival of some
business. Cause their earnings to dip below acceptable levels, intercept their operations or slow
their growth. All business faces the threat of losses that may never occur. Worry about these
possibilities does more than make life less pleasant, it may stop a business to handle it is

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exposures to accidental losses in the most economic and effective way. Risk management is the
identification, measurement, and treatment of exposures to potential accidental loss.
Organizations of all sorts have recognized the increasing importance of sound risk management.
As life has become more complicated, more. (Triechaman , James and Gustvon, Sendera 1998,
page 113). Interrelated and more uncertain new loss exposures have been created and the
severity of many old exposures increased. In some firm top management has assigned primary
responsibilities for the risk and management is to a specialized department.

The purpose of risk management is to minimize the hurt at a minimum cost and its contribution
to the business can also be categorized as follows:

 Risk management may take the difference between survival and failure that means risk
management can contribute directly to business profits for profit making organizations
and increase efficiency for nonprofit making organizations because profits can be
improved by reducing exposures as well increasing income.
 If the business has successfully managed its pure risks the peace of mind and
confidence permits its managers to investigate and assume attractive speculative risks
that they might otherwise seek to avoid.
 By altering general managers to the pure risk aspect of speculative ventures risk
management improves the quality of the decision regarding such ventures
 Once decision aids made to assume speculative ventures, proper handling of the pure risk
aspects permits the business to handle the speculative risks more wisely and efficiently.
 Risk management can reduce the functions in annual profits and cash flows investors
regard more favorable a stable earnings record than unstable one.
 Through advance preparation, risk management can in many cases make it possible to
continue operations following a loss. Thus training customer suppliers who might
otherwise turn to other competitors.
 Creditors, customers and suppliers all of whom contribute company profits, prefer to do
business with a firm that has sound protection against pure risks. Employees also prefer
to work for such firms.
 The peace of mind made possible by sound management of pure risks may itself be
valuable non-economic assets because it improves the physical and mental health of the

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 management and the owners. Because the risk management plan may also help others
such as employees, who would be affected by loss to the firm, it also helps to satisfy the
firm’s sense of social responsibilities and creates good public image. (wiliam
Jr ,ricahrd,hence,1985 page 7)

3. RESEARCH METHODOLOGY

3.1. Research Design

Both the quantitative and qualitative approach will use to collect and analyze data obtained from
individual samples. The quantitative approach will used to collect and analyze numerical data
obtained from individual employees. The qualitative approach is used to examine and reflect on
key informants. The researcher will use descriptive survey method. This is because the study
calls for collecting data using questionnaires and the study will try to assess risk management
practice in Abyssinia bank Wolkite branch.

3.2. Sample design

3.2.1. Target population

The target population of this stud will be employees working in the current bank of Abyssinia at
Wolkite branch. Currently, Abyssinia bank of Wolkite branch encompasses twenty nine
employees. Out of which the researcher will include fifteen employees for this study.

3.2.2. Sampling Size and Technique

Sample refers to a small amount or part of something that shows what the rest is or should be
while sample technique refers to the procedure a researcher would adopt to select the sample of
his study (Kothari, 2004). The study area of Abyssinia bank Wolkite branch has a total of
twenty-nine employees. Out of which 19 are male employees and 10 are female employees.
Stratified sampling techniques will use to select male households and female households from
Abyssinia bank of Wolkite branch. After stratified the households in to male- employees and

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female-employees, 23 employees will select for this study from 29 total employees. Among this,
15 are male- employees and 8 are female-employees will select by using systematic random
sampling technique. In addition to these four respondents for key informant interview will select
for this study.

Sample Size Determination

To determine the required sample size at 90-95% confidence level and 5-10% level of error the
investigator use the following formula provided by Yamane (1967).

N
n= 2
1+ N (e)

Where; ‘n’ = is sample size

‘N’= is the population size (total households)

‘e’= is the level of perception (margin error)

29
= = 23
1+ 29 ¿¿

3.3. Sources of Data

In this research, the researcher used both primary and secondary data sources in order to collect
necessary information to this study. As primary source, information will collect using
Questionnaires and Key Informant Interview (KII). The study also will be used various
secondary sources to argument the finding from the primary data: such as review of related
literature, review of reports information at Abyssinia bank level, on risk management practices
of Abyssinia Bank Wolkite branch.

3.4. Instrument of Data Collection

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The main instruments of primary data collection are structured survey questionnaires and key
informant interviews will be tools used in collecting primary data. Questionnaires, interview and
company profile would be used as primary sources of data and will significantly contribute for
the study and would come up with a lot of data that is constructive for study. To collect data
from primary source, as indicated earlier, the researchers will use data collection method through
questionnaires and interview.

The researchers would construct a number of questions in a logical order. Besides, the
researchers would also ask question in face to face interview with the bank manager. To collect
data from secondary source the researchers will use books and tables of information obtained
from the bank and library. The researcher therefore refers books about risk management in bank
as evidences.

3.6. Method of Data Analysis

Based on the nature of basic questions and data collected, both qualitative and quantitative
method of data analysis will be used to interpret findings. The important descriptive statistics
such as mean, frequencies, and standard deviation will use to analyze quantitative data.
Similarly, qualitative data obtained through interviews will be analyzed by describing and
interpreting the situation deeply and contextually on the assessment of risk management
practices.

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 4. WORK PLAN

No
Activities 2024 2014
Jan Feb Mar Apr May Jun Jul Aug Sep
1 Proposal preparation X

2 Proposal defense X
3 Data collection X
4 Data auditing, coding
and project progress X X
5 Literature review X
6 Data analysis and draft
thesis writing X X X
7 First draft submission
X
8 Thesis submission X
9 Thesis defense X X

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 5. LOGISTICS

5.1. Stationery expanse

S/N Item Unit Quantity Unit Total cost/ Remark

price/ birr
birr
1 Duplicating paper Ream 5 110 550
2 Square paper Ream 3 50 150
3 Lined paper Ream 3 50 150
4 Writing pad Piece 6 10 60
5 Staler Piece 1 1 75
6 Steeples Packet 3 8 24
7 Ball point pen Piece 20 2 40
8 Pencil Piece 15 1 15
9 Eraser Piece 4 1 4
10 RW CD Piece 15 40 500
11 Flash dick Piece 1 400 400
12 Binder Piece 1 150 150
13 Marker Piece 6 12 72
Sub total 2140

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5.2. Advisor’s Fee

S\N Activity Unite NO Daily Total

payment payment/Birr
1 Advisor fee
2 Co-Advisor fee
Subtotal

6. REFERENCES

ERNST &YOUNG. 2009. Risk Convergence: The Future State of Governance, Risk, and
Control.
ISF, IR AM. 2010 https://www.securityforum.org/?page=DocumentView&itemid=4414.June
2010.
GARTNER. 2010. The Gartner Magic Quadrant for Operational Risk Management for Financial
Services. www.gartner.com/it/products/mq/mq_ms.jsp

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