RESEARCH PROPOSAL

A comparative analysis of Risk

Management Practices in banking &
insurance sector
Table of Content
• Abstract • Research Design
• Introduction and background Study Type
of the study Population
• Problem Statement Sample & Sampling Strategy
• Research Objective The Measurement
• Purpose & Scope of the study Instrument
• Significance of Research Data Processing & Analysis
• Literature Review • Limitation of the study
– Operational Definitions • Budget
– Existing Model & • Tentative timeframe for
theories with the focus research
on identify gap in • Tentative structure of the
literature dissertation
• Conceptual Framework • Bibliography
– Dependent and
Independent Variables
– Relationship among
variables
 Abstract
• Risk Management Practices are designed according to the
need of that specific financial institution, for comparative
analysis banking sector and insurance sector is selected.
Firstly description of the risk type they are exposed is given
then the design of the risk management practice is
elaborated. It means how that need can be rectified with the
help of different financial tools. After completing the inner
analysis for one institution, result would be compared to the
other one. So that consolidated result can be generated on
the Risk Management Practices, which can be help full in
generating more extensive research on their risk profiles and
remedy needs.
 Introduction/background to the
study
• Four Important points
a) Importance of Risk Management Practices
b) Risk Management Practices in Banks
c) Risk Management Practices in Insurance Sector
d) Comparative Analysis
• Importance of Risk Management Practices
Risk Management Practices have become vital area of
concern for many financial institutions like banking &
insurance sectors. Although the objective of both is to
manage risk but their ways for getting that objective differs on
the basis of type of risk they want to manage.
• Risk Management Practices in Banks
• Bankers first identify the risk type then classify it into more
focused categories e.g. credit or foreign exchange risk, then
they use different tools to measure that specific risk and in
last manage it by making polices . Here one point have
concurrent importance that these policies are not stagnate
they are purely dynamic in nature, hence banker can mold
these polices as the circumstances change. Banker tries to
transform each risk they face into the interest rate they
charge.
• Risk Management Practices in Insurance Sector
Talking about Insurance industry as a general understanding
says insurance itself means insuring against any potential risk
or loss. So here organizational focus is itself managing risk.
That main purpose derives the need for a risk management
system which can have a check, balance, monitoring and
management at each & every level of the insurance firm it
leads the insurance firms to shift from traditional risk
management to enterprise risk management concept. Here
risk managers don’t avoid the risk they take and distribute it
their clients, but they try to exclude the terms from policy,
which can be very riskier e.g. any benefit offered to life
insurer which can create liquidity risk for firm can be
negotiated or may be terminated.
• Comparative Analysis
Comparative analysis of risk management practices in banking
and insurance sector can be very helpful for having a
overview, on which grounds their practices differ although
sometimes they are having same risk type e.g. credit risk but
banking & insurance sector may use different approach to
cater it, so clearing that objectives and proving them with
theoretical & practical base is a area calling for more research.
 Problem Statement
• Risk Management Practices are widely used in financial
institutions because they are more exposed to risk. Carey
(2001) indicates in this regard that risk management is more
important in the financial sector than in other parts of the
economy. Difference exists between risk management
practices & instruments used in various financial institutions
e.g. banking & insurance sector. Ambiguity exists in risk
management practices regarding the specific type of risk
faced, their determinants and about the need for a particular
risk management approach in specific situation. .
Comparative analysis of risk management practices in
banking and insurance sector can be done in this regard to
reduce that ambiguity.
 Research Objectives

• 1. To identify the various risks which the banking and

insurance sector is exposed to in their routine business
transactions.
• 2. To investigate how these risks can be effectively managed
depending on the need of the system
• 3. To identify different risk and exposure management
techniques
 Purpose and Scope of Study

• Purpose is to identify the prevalent risk

management practices in Insurance & banking
sector and to know how that practices can be
modified. Focal point of the study is financial
institution’s risk profiles in Pakistan.
 Significance of Research
After doing it any of the following contribution could be made;
Allot of research have been done on both sectors risk
management practices but the main lacking point is that they
just tell risk management practices is fruitful for both, and
provide Var or ERM tool, yes indeed it is but it should be clear
that how RMP is implemented and what exposure leads to
implement any specific type of risk management approach, so
researcher in future can have a more deep insight into risk
management practices of both from study on it.
It could help to develop more risk management instrument
after knowing their need.
Plus it could help to identify a uniform method to manage the
same type of risk that both sides face.
 Literature Review
Operational definitions

• According to Pagano (2001) “Risk management is an

important function of financial institutions in creating value
for shareholders and customers. Risk Management is the
process of identification, analysis and either acceptance or
mitigation of uncertainty in investment decision-making.
Essentially, risk management occurs anytime an investor or
fund manager analyzes and attempts to quantify the potential
for losses in an investment and then takes the appropriate
action (or inaction) given their investment objectives and risk
tolerance. Inadequate risk management can result in severe
consequences for companies as well as individuals”.
• According to Calandro (2008) “Enterprise risk management
(ERM) in business includes the methods and processes used
by organizations to manage risks and seize opportunities
related to the achievement of their objectives. ERM provides
a framework for risk mangement which typically involves
identifying particular events or circumstances relevant to the
organization's objectives (risks and opportunities), assessing
them in terms of likelihood and magnitude of impact,
determining a response strategy, and monitoring progress. By
identifying and proactively addressing risks and opportunities,
business enterprises protect and create value for their
stakeholders, including owners, employees, customers,
regulators, and society overall. (ERM)”
Existing models and theories with focus on identifying
gap in literature

• Identified the type of risk banks are exposed of

• What type of risk management approaches or tools are used
for managing them
• Identified the type of risk insurance companies are exposed of
• Risk management approaches according to their business
need
• Determination of variables that effect the RMP
• After getting through the previous research on determinates
of Risk Management Practices done by Frosdick (1997),
Rosman (2009), Khalid and Amjad (2012), Al-Tamimi and Al-
Mazrooei (2007), Sensarma and Jayadev (2009) and Calandro
(2008) it can be concluded that risk management is affected
by following variables.

• Understanding risk and risk management (URM)

• Risk assessment and analysis (RAA)
• Risk identification (RI)
• Risk Monitoring (RM)
• Credit Risk Analysis (CRA)
• Hypothesis
• H1: There is a positive relationship between risk management
practices(RMP) and Understanding risk and risk management
(URM)
• H2: There is a positive relationship between risk management
practices(RMP) and Risk assessment and analysis (RAA)
• H3: There is a positive relationship between risk management
practices(RMP) and Risk identification (RI)
• H4: There is a positive relationship between risk management
practices(RMP) and Risk Monitoring (RM)
• H5: There is a positive relationship between risk management
practices(RMP) and Credit Risk Analysis (CRA)
 Conceptual framework
Dependent and independent variables
 Research Design
• Study type
Comparative Analysis
(The item-by-item comparison of two or more comparable alternatives,
processes, products, qualification, sets of data , system , or the like. )
• The Population
75 population size (50 Insurance firms and 25 Distinctive banks in
Pakistan)
• Sample and sampling strategy
Sample size is 51 and calculated through the formula of sampling.
n = P (1- P)(Z/E)2
• The measurement Instrument
Questionnaire
• Data Processing and Analysis

• Statistical tools
i. Regression( & t-test for significance) with in sector
ii. Correlation

• Statistical software
• SPSS
• Limitation of Study
Study is only focusing on financial Institutions in Pakistan.
• Budget
10,000 Pak Rupee

• Tentative Time Frame For Research

Time Period Task

2 Months Development of theoretical
base for the study &
Introuduction
1 Month Data collection
1 Months Data Analysis
1 Months Data interpretation &
Conclusion
Total 5 Months
• Tentative Structure  Theory
of Dissertation
• Copyright waiver
• Declaration
• Title page
• Abstract  Results and discussion
• Acknowledgments • Final chapter, references and
• Table of contents appendices
• Introduction  Conclusions and suggestions
• Literature review for further work
• Middle chapters  References
 Materials and Methods  Appendices
Any Question?