CHAPTER FIVE
SUMMARY, RECOMMENDATIONS AND CONCLUSION
This chapter will summarize findings of the analyses of the
data collected. it will also involve proposals of possible recommendations with
a conclusion pertaining to the whole study will be drawn.
5.1 SUMMARY OF FINDINGS
The summary of findings can be examined as follows:
- It has been found that the relationship between risk
management and the profitability of financial institutions in Cameroon is
strong over the period 2002-2005.
This is explained by the fact that an increase in liquidity
position of the firm is related to a shift in credit as explained in figures
4.2 above:
- It has also been found that the higher the liquidity ratio,
the lower the liquidity risks and the higher profit margin and return on
equity.
- Another funding was that when the liquidity risks are high,
the return on equity is low due to the fact that as the assets of the firm are
not liquid, they can not make enough loans in order to get more profits and
since the exposure to risk is too high, borrowers will be discouraged to
request loans from the bank. This was proves from the period1996/1997 to
1998/1999 in SOWEFCU where liquidity risks was a negative function of
profitability.
- During the period of analysis, 2003-2004, we found that when
credit risks re reduced in commercial banks, the side effect is the increase in
profit margin. Since credit is the main tool of raising finance for the
commercial banks, any default will tend to reduce profit, hence yielding a
loss.
5.2 RECOMMENDATIONS
Based on the findings of this study that state that risk
management and profitability of financial institutions are perfectly related
over the period of study 2002-2005, the following recommendations can be
made:
· Financial institutions, may it be central bank,
commercial banks, micro financial houses, should practise a sound risk
management policy is their organisation. This will facilitate the handling of
risk and enhance huge profits to be made thus fostering growth in the
industry.
· The risk management of financial institutions must set
adequate liquidity level which will be as a standard over the years for the
sake of profitability, expansion financial worthiness and the public
credibility.
· Financial institutions must carefully plan for risks,
identifies, analyses and assess the potential trouble which may alter the
implementation of company's policy.
· Concerning credit risks, financial institutions must
investigate the credit demand from borrowers and assess whether they are
financially able to repay the loan in due terms in an optic of reducing credit
risk.
5.3 CONCLUSION
During the course of this study, a theoretical framework was
established to illustrate the theoretical relationship that exists between
variables involved in the study. This involved a brief review of related
literature, empirically the relationship between these variables was tested to
verify the influence of risk management on profitability and risk reduction
from 2002-205. After conducting the necessary data and carrying out the
necessary analysis, it was discovered that risk management has a strong impact
on the profitability of financial institutions from 2002-2005 in Cameroon.
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