Impact of Financial Risk Management Measures on Financial Performance of A Bank – Case of Axis Bank

Abstract

Banking industry occupies strategically key position in an economy as they are the key enabler for rest of the industries. Efficient banking industry can create conducive economic environment in which other manufacturing and service sector thrive. Commercial banks are like any other commercial venture in terms that it aims to earn profit but they are unique as they deal in money. Bank as a business entity operating in the vibrant globalized economy faces many challenges. These challenges can be termed as risks as they have fair amount of knowledge about them. In fact, economy health can be assessed by understanding financial performance of the banks (Haque, Sharma, 2011). Bank’s financial performance can be assessed by return on asset (ROA) and return on equity (ROE). As per Bank for International settlement banking activities are related to customers and investment of equity. This gives rise to financial risk. There is inverse relationship between risk and return. Banks must balance its exposure to financial risk and the returns earned. Efficient financial risk management should have favourable impact on the profitability of the bank. In this paper a case of Axis bank is considered to understand the association between the financial risk management and the returns earned by the bank. It is found that efficient risk management has impact on the performance of the bank.