A study of Risk Management in the United Arab Emirates Banking Industry
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Date
2010-04
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Publisher
The British University in Dubai (BUiD)
Abstract
Purpose- This research is an attempt to discuss risk management and its importance to the fundamental operation of banks in UAE & whether the Basel II agreement is still relevant in the current financial crisis, and whether it has helped contribute to the severity of the downturn by creating capital shortages at banks in the UAE and in general.
Design/methodology/approach-Questionnaires were distributed to key risk managers in a sample of UAE banks .The questionnaire is composed of three main parts with a total of 42 questions. The first part consists of 12 questions & focuses on obtaining ordinal judgements of the ranked importance and effectiveness of the five main risk management techniques identified by the literature review. The second part consists of 28 questions & was used to answer the 4 research questions; the degree of understanding & implementation of risk management, the most efficient tools and techniques available for the management of risk, the extent to which managers are aware of the risks that are associated with their actions and goals & if Basel II agreement assisted or hindered risk management amongst banks in the UAE. It is based on a five point Likert scale ratings of individual factors. The third section includes two open ended qualitative questions designed to obtain more subjective details from the employees around their specific attitudes towards, and understanding of, risks and risk management, as well as clarify their answers to the quantitative questions.
Findings-– Based on the results of the analysis in this study, it is concluded that the UAE banks are only facing a relatively narrow range of risks, and similarly are not using a particularly diverse range of risk management practices. As such, they focus on the relatively blunt tools of risk mitigation and risk elimination, rather than taking a more advanced strategic approach. As the UAE is currently in something of a transitional period, with Basel II in the process of being implemented, the study should be repeated once implementation is A study of Risk Management in the United Arab Emirates Banking Industry complete. This will help produce a better understanding of the impact of Basel II on the UAE, as well as demonstrating how the implementation of the Basel II agreement has changed risk management practices in general.
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DISSERTATION WITH DISTINCTION
Keywords
risk management, United Arab Emirates (UAE), banking industry, Basel II, financial crisis, risk managers, UAE banks