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Banks' risk management: a comparison study of UAE national and foreign banks

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Abstract:

Purpose ‐ The purpose of this research is to examine the degree to which the UAE banks use risk management practices and techniques in dealing with different types of risk. The secondary objective is to compare risk management practices between the two sets of banks. Design/methodology/approach ‐ The authors developed a modified questionnaire, divided into two parts. The first part covers six aspects: understanding risk and risk management; risk identification; risk assessment and analysis; risk monitoring; risk management practices; and credit risk analysis. This part includes 43 closed-ended questions based on an interval scale. The second part consists of two closed-ended questions based on an ordinal scale dealing with two topics: methods of risk identification, and risks facing the sample banks. Findings ‐ This study found that the three most important types of risk facing the UAE commercial banks are foreign exchange risk, followed by credit risk, then operating risk. It also found that the UAE banks are somewhat efficient in managing risk, and risk identification and risk assessment and analysis are the most influencing variables in risk management practices. Finally, the results indicate that there is a significant difference between the UAE national and foreign banks in the practice of risk assessment and analysis, and in risk monitoring and controlling. Originality/value ‐ The article will be of value to those interested in the banking industry.

Keywords: Banks; Credit management; Foreign exchange; Risk analysis; Risk management; United Arab Emirates

Document Type: Research Article

DOI: http://dx.doi.org/10.1108/15265940710777333

Publication date: August 21, 2007

mcb/294/2007/00000008/00000004/art00006
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