IMPACT OF RISK ASSESSMENT TECHNIQUES IN THE FINANCIAL PERFORMANCE OFFINANCIAL INSTITUTIONS LISTED IN PSE 1778635203200 An Undergraduate Thesis Presented to the Faculty of the College of Accounting Education Katrina Bea T

IMPACT OF RISK ASSESSMENT TECHNIQUES IN THE FINANCIAL PERFORMANCE OFFINANCIAL INSTITUTIONS LISTED IN PSE
1778635203200
An Undergraduate Thesis
Presented to the Faculty of the
College of Accounting Education
Katrina Bea T. Almenario
Alima S. Bato
Rayjenn Danielle M. Ferriols
June 2018
17-071
Abstract
This study aims to determine the impact of risk assessment techniques among the financial institutions listed in the PSE to its financial performance in terms of ROA and ROE. The proponents used total population sampling technique in the Philippine companies identified under the financial sector of Philippine Stock Exchange by gathering and analyzing available annual financial reports in 2015. This study employs descriptive-correlational design of researchto examine the relationship of the risk assessment techniques used by the financial institutions in its financial performance. The statistical treatments used to analyze and interpret the data were mean and regression; using a DEA as a statistical tool. The study observed that the risk assessment techniques has no impact on the financial performance of financial institutions listed Philippine Stock Exchange. Moreover, the study revealed that risk assessment techniques applied in financial risk, operational risk, and strategic risks had are efficient; and the ROAand ROEimplicates that there is a high financial performance in the financial institutions. Although, the techniques had an insignificant effect on both ROA and ROE. This proposes that financial institutions listed in the Philippine Stock Exchange financial performance are not affected by the risk assessment techniques.

Keywords: Accounting, risk assessment techniques, financial performance, financial institution, DEA, PSE, descriptive-correlational design

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Chapter 1
Introduction
Background of the Study
When a country’s local financial system is integrated with international financial markets and institutions, it is termed as financial globalization. This particular action necessitates that governments liberalize the domestic financial sector and the capital account (Mendoza ; Quadrini, 2010). A number of circumstances are required to happen to effectuate integration, some of which are: when liberalized economies undergo an accrual in cross-country capital movement, this entails an active participation of local borrowers and lenders in international markets and an expansive utilization of international financial intermediaries. The need for sound economic policies and effective risk management strategies, prudential supervision and proper reporting standards to meet the emerging challenges liberalized economies (Mohua, Rekha ; Sangita, 2006). In this aspect, however, developed countries are the biggest players in the financial globalization process, but developing countries such as those that have primarily middle-income have begun to participate (Schmukler,2004).

The international financial system, although greatly regarded due to the remarkable developments seen in financial globalization at present, is still distant from being perfectly integrated. International banking regulation does not address the ?nancial stability risks (University of Cambridge Institute for Sustainability Leadership CISL. 2014), proof has been presented of persistent capital market segmentation, home country bias, and correlation between domestic savings and investment. Rhyne and Busch (2006) said that the return to the past has been seen to command a larger price thus making it very rigorous for financial institutions. This has been deemed to be caused by recent deregulation of financial systems, the technological advances in financial services, and the increased diversity in the channels of financial globalization. This renders the reversibility of financial globalization to be highly improbable, most especially for partially integrated economies. Nonetheless, there is still the possibility of that happening and it is very crucial, to connect risk management (Arrif, Ishak ; Ismail, 2014). While putting in mind the benefits of financial globalization, we cannot turn a blind eye on the risks that it also carries. The liberalization of the financial systems of countries and the integration with world financial markets have shown to cause financial crises and contagion, leading us to believe that that globalization generates financial volatility and crises.

Furthermore, macro stability can be achieved through well-functioning and healthy banking, as it was pointed out by global financial crisis. Major financial loss and bankruptcy may be an effect of taking up high risks that bank managements are incapable of controlling and managing. The said situation can be readily evaded if only institutions have an internal control system that will monitor risks and major breakdowns to avoid threatening the success of the banking sector (Hayali et al., 2012).

The complexity of the Philippine financial system also coped up along with the aggressive economic policy and structural changes in the 1980s and 1990s. The reform processes in the 1990s have provided a way for the rapid expansion and eventual integration of the local financial system with the rest of the world. The entry of foreign capital have been more unrestrained due to the said structural reforms. This, in turn, have given an opportunity for healthy competition and increased efficiency. And with the application of modern technology and greater transparency, there is now broader opportunities for growth (Guinigundo, 2005).

Recent research shows that many companies fail to connect risk and performance in the course of basic performance management. Just 37 percent of nearly a hundred senior executives at US-based multinationals surveyed by PricewaterhouseCoopers in 2008 said their companies link key risk indicators to corporate performance indicators. (PricewaterhouseCoopers PWC, 2009)
The implementation of the Special Purpose Vehicle (SPV) Act of 2002 has proved to decline the steady progress in banks’ disposition of their idle assets and have presented a moderate increase in total loans of banks (Organization for Economic Cooperation and Development OECD, 2014) External and domestic shocks have been endured by the domestic financial system since the 1997 financial crisis. Some issues, however, still requires to be dealt with to make sure of the stability of the financial systems and to be able to fully exploit growth opportunities. Some of which are the following: improving asset quality, managing risk exposures, and developing the domestic capital market.

Negligence is the primary reason of the failure of risk management in some international major corporations (Tamás-V?neki & Báthory, 2017). They have failed to identify and evaluate the risks present both internally and externally which led organizations to invest more time on risk management to avoid such failure. Risk management failure has shown to be of great impact in their financial performance, and is a major obstacle in achieving the objectives of the corporation. In order to prevent this failure, companies are encouraged to create competent policies in managing and handling risks. This will enable them to reduce risks to an acceptable level and continue to go on with the full capacity of their company to provide excellent service (OECD, 2014)
It can be inferred that research gap exists, as there are no studies that address the effect of risk assessment techniques on the financial performance of financial institutions. Furthermore, majority of the studies conducted and presented were done outside of the Philippines, leaving us with little to no related literature in the context of this country. 
Objectives of the Study
This study will elucidate the relationship of the financial performance of financial institutions listed in Philippine Stock Exchange (PSE) and the risk assessment techniques used.Specifically, this study seeks to attain the following objectives:
To assess the efficiency of risk assessment techniques that were used to measure:
Financial risk
Operational risk
Strategic risk
To determine the financial performance of the financial institutions through:
Return on Asset (ROA)
Return on equity (ROE)
To determine the impact of the risk assessment techniques on the financial performance among financial institutions listed in PSE.

Statement of Hypothesis
This study’s assumption made in order to draw out and test its empirical effect. Whereas, (H0) there is no significant relationship between the risk assessment techniques and the financial performance of the financial institutions listed in PSE.

Significance of the Study
This study would be beneficial to the following:
Philippine Stock Exchange (PSE). In financing of productive enterprises the PSE plays an important role, where the use funds for growth and expansion of new jobs which are essential to the growth of the Philippine economy. The PSE has committed itself to (a) protecting the interest of the investing public; and (b) developing and maintaining an efficient, fair, orderly and transparent market.

Stockholders. Those who acquired stocks of the financial institutions can benefit from this study since one of their primary interests is to know that their investment is doing well financially. Thus, financial data are presented in the statement of financial position.

Management. The management of the financial institutions which are listed in PSE can benefit from this study since one of their duties is to develop, enhance, safeguard and administer the cooperative’s assets and equity. This can be done by strengthening internal control with the help of risk assessment techniques.

University of Mindanao. The faculty and staff can benefit from the study since it would
be a source of gaining more information aiming to increase knowledge and understanding in risk assessment techniques.

Future researchers. This study can be a source of information for the future studies.

Definition of Terms
The following are the operational definition of terms that were used in this study:
Financial institutions. These the business entities that are officially enlisted in the PSE. Primarily compose of banks and other financial institutions.

Risk assessment. It is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities (Wenk, 2005).

Risk assessment techniques. The methods established to prevent or minimize the risks.

Chapter 2
Review of Related Literature
This part of the study indicates readings in literature and studies, which is related to the present study. This covers the discussion on risk assessment techniques: financial risk, operational risk, strategic risk; effect of risk assessment techniques in the financial position.

Financial risk. Financial risks, as well as non-financial risks, are always present in running a company. However, in contrast, financial institutions lean more toward financial risks, wherein credit, liquidity or market risks are the major examples. Also, operational risks are also showing to be of increasing regard in this matter. On the other hand, non-financial institutions will have the same risks mentioned earlier but only to a certain extent not always similar to that of financial institutions (Organization for Economic Cooperation and Development OECD, 2014).

Systemic financial risk has proven to be the most urgent and the most serious among the risks present. The 2007 liquidity crunch that has created various probable repercussions has remained to be unsettled. This renders the prospective future unforeseeable (World Economic Forum WEF, 2008).

Gakure et al. (2012) concluded that in a banking organization, the bank’s capacity to fulfill its business objectives is challenged, as there will be restrictions imposed as a result of financial risk. Kolapo, Ayeni and Oke (2012) showed the effect of their study that the method of analysis that was utilized in their study has not been able to point out the degree of which individual banks were affected with the results of credit risk. It has, nevertheless, been able to demonstrate that the effect of credit risk on back functioning measured by ROA was cross-sectional invariant.
Through the study of Poudel (2012) that investigated the various indicators of credit risk management that are affecting a bank’s financial performance, we are able to arrive at the conclusion that the default rate was the indicator that affected the bank’s financial performance the most. The same result was reflected in the study of Musyoki and Kadubo (2012). They have evaluated the different guidelines that apply to the management of credit risks as it influences the performance in the financial aspect of banking. The results have demonstrated that although all those parameters had an inverse effect on the financial performance of banks, the default rate was the indicator of credit risk management that most affected it.

Operational risk. Wanjohi and Ombui (2013) have shown the level of agreement of respondents towards the creation of a risk management department within a company and its significance in dealing with operational risk management. Eighty-eight percent of the respondents gave approval to the formation of a risk management department and regarded it as a substantial advantage for the company. The rest of the respondents gave neither consent nor rejection with the said standpoint.

Strategic risk. Joint Committee of Structural Safety (2008) expressed that an organization’s goals can be accomplished through the utilization of risk management both at the individual activity level and in functional areas. Risk management plays a role in the decision-making aspect of an organization (Association of Chartered Certified Accountants ACCA, 2012), more specifically in the settlement of opposing ideologies, some of which include: science-based evidence and other factors; costs with benefits and expectations in investing limited public resources; and the governance and control structures needed to support due diligence, responsible risk-taking, innovation and accountability.

Basel Committee on Banking Supervision (2003) published that integrated risk management is a highly effective process, thus it does not only observes and manages potential risks that might hinder an organization from achieving its corporate objectives but also promotes activities to help assist organization in getting the best results possible. Also, it encourages the use of hierarchical limit systems and risk management committees that work on the determination of the setting and allocation of limits. Its main aim is to keep the organization balanced, thus, always in the best possible situation.

The current risk frameworks and process that are deployed were not coping up to the needs of the company anymore as claimed by 49 percent of the respondents, many of which are executives. They are particularly concerned with ‘catastrophic’ risks that have manifested to be of increasing influence, which will greatly affect and is perilous to an organization’s survival and are also said to be able to subvert entire industries. The boards reckon that their money and time were not put into proper application, as it might be best if they had been able to swiftly identified and discussed new risks. The outcome being that a number of people believe that the expenses for the current ERM are not warranted of its appropriate gain. Thus, it exhibits that the current techniques for strategic risk management of AIG are no longer serve its objectives (Wanjohi ; Ombui, 2013).

Risk Assessment Techniques and Financial Performance. Problems arising from the risk management of financial sectors do not only affect banks, but to a greater extent, it affects the economic growth (Tandelilin et al., 2007). Particular corroborations have suggested that the past return shocks from banking sectors have greatly affected foreign exchange, and aggregated stock markets. Moreover, it has greater impact on their prices, giving off the notion that the bank has the capacity to be a major source of contagion in the event of a crisis. Evidence was also provided by Cebenoyan and Strahan (2004) that banks, which possess advanced risk management processes, have greater credit availability instead of decreased risk in the banking system.

Considerable exertions for the development of risk management have been observed by the 21st century. The expected profit and the distribution of the firm returns around their expected value is made possible to deal with through risk management. This brings forth the motive for the putting in order of the firm objective functions to be able to elude risks (Babbel ; Santomero, 1996).

Understanding the risk and identifying the different alternative courses of actions are one of the basic steps involved in managing the risk. Also, a detailed examination of all the alternatives would help the users in the process of the decision-making (Hussain ; Al-Ajmi, 2012). A mutual understanding across the bank about and its components of risk involved in banking must be established as well as the responsibilities of the employees in the bank. The entity must also put an importance to the accountability of risk management to avoid the so called “Blame Game” during the crisis situation. 
The bank’s roles and responsibilities must have a provision for risk identification when things could go wrong (Hassan, 2009). Knowledge about the strengths and weaknesses of other banks is also important for the risk identification of a bank. So a systematic procedure for risk identification for the risk will have to be developed by a bank and it differs from bank to bank.
Risk identification is developed individually by banks and thus is different from bank to bank. This should be encompassed by the bank’s roles and responsibilities in order to be able to cope up with the risks present. Familiarity of the strengths and weaknesses of other banks may be found to play a role in risk identification of a bank. Consequently, a systematic procedure for risk identification should be set in motion (Hassan, 2009). The probability of the occurrence of a risk should be determined, and as such, a number of quantitative techniques are present for its assessment (Hussain ;Al-Ajmi, 2012)
Thirty-seven percent of nearly a hundred senior executives at US-based multinationals surveyed by PWC in 2008 is an indication that many companies are unsuccessful in associating risk and performance in the course of basic performance management (PricewaterhouseCoopers, 2009)
A pioneering study done by Akindele (2012) has demonstrated the effect of risk management and corporate governance on bank performance. A positive relationship was observed between risk management and bank performance. Moreover, the effectiveness of risk management prove to be contributory to the bank profitability, thus, making bank performance heavily reliant on the implementation of proper risk management and corporate governance.
Effectual internal control has been found to contribute improvement in financial reporting quality, which is represented for by accruals quality and the size of abnormal accruals (Doyle et al., 2007; Ashbaugh-Skaife et al., 2008). Effective internal control also decreases information risk that also decreases the firm’s cost of equity in the long run. However, other studies, such as that of Ogneva et al. (2007), have not been successful in finding a significant relationship between internal control weakness and cost of equity after controlling for firm characteristics and analyst forecast bias. But still, others have proved that material weaknesses in internal control are linked to a higher cost of debt (Kim et al., 2011).

There have also been investigations of the implications of internal control beyond financial reporting. For instance, in the study of Feng et al. (2009), internal control quality and management guidance accuracy have been found to possess a positive relationship with each other. It conforms to ineffective internal control leading to inaccurate internal management reports. Another study conducted by Cheng et al. (2013) examined the investment behavior of a sample of firms that disclosed internal control weaknesses. One cause of suboptimal order quantities, as claimed by the authors, is inventory-related material weaknesses in internal control which gives way to higher inventory levels and higher holding costs. Additionally, inaccurate tracking of inventory and internal valuation processes influences the mismanagement of inventory enabling larger and more frequent inventory impairments as out-of-date or obsolete product loses market value. It can then be concluded that weaknesses in internal control over inventory adversely affect inventory management. Their study, however, do not encompass whether material weaknesses in general affect operational efficiency at the overall firm level, the issue that they examine in this paper.

Theoretical Framework
This study was anchored on several studies. First, the study of Kokobe and Gemechu (2016), entitled “Risk management techniques and financial performance of insurance companies” wherein the financial performance of a certain business sector in Ethiopia was evaluated on whether or not the identified risk management techniques has an impact. Another is from the study entitled “The effect of risk management on bank’s financial performance in Nigeria,” of Olamide, Uwalomwa, and Ranti (2015) published on Journal of Accounting and Auditing: Research & Practice. Both studies seek for the efficiency of risk assessment techniques in relationship with the financial performance.
There are some modifications made with the study to be suitable in the Philippine setting; adjusting the respondents into financial institutions that are listed in PSE and make used of risk assessment techniques for financial risk, operational risk, and strategic risk.

Conceptual Framework
This study aspires to determine the impact of risk assessment techniques in the financial performance of the financial institutions listed in PSE. Figure 1 shows the relationship of independent variable and dependent variable.
The independent variable is the risk is the risk assessment techniques, under which are the financial risk, operational risk, and strategic risk. The dependent variable of the financial performance, in which profit ratio and ROE will be the measure to show the performance on the financial institutions.

327152092075Dependent Variable
Financial Performance:
ROA
ROE
00Dependent Variable
Financial Performance:
ROA
ROE
6350092075Independent Variable
Risk Assessment Techniques:
Financial risk
Operational risk
Strategic risk
00Independent Variable
Risk Assessment Techniques:
Financial risk
Operational risk
Strategic risk

242760534036000
Figure 1. Conceptual Framework of the Study

Chapter 3
Method
In this chapter of the conducted study will be the methods and procedures to be used is being illustrated. From which it provided necessary information regarding the research design, research respondents, and research instrument. As well as the gathering of the data and statistical tools used in the study is being presented here.

Research Design
This study will use descriptive-correlation research design, which is a method where the information is collected without making any changes to the study subject. According to Mugenda, M.O. and Mugenda, A. (2006), a descriptive research is a process of collecting data in order to answer questions concerning the status of the subjects in the study. Kokobe and Gemechu (2016) cited that data collected are analyzed using correlation research design to check the relation between the independent variable and independent variable. It would be the most appropriate to use since descriptive method gives accuracy and statistically reliable data and correlational method give details about if whether two or more variables can be associated, if there is an existing relationship between the identified variables. Given that this study aims to examine the relationship of the risk assessment techniques used by the financial institutions in its financial performance.

Research Subjects
The respondents of the research will be the financial institutions with the annual reports in 2015, which are listed in PSE. The sampling technique employed in the study was the total population sampling. The total population sampling technique is a type of purposive sampling technique where the entire population that have a particular set of characteristics are examined, with such wide coverage, there is a reduced risk of missing potential insights from population that are not included. Total population sampling is more commonly used where the number of cases being investigated is relatively small. (Alkassim, Etikan & Musa, 2015). Out of 31 companies which was categorized under financial sector in the Philippine Stock exchange, only 20 companies has annual reports in 2015.

Research Instrument
The measurement of the efficiency of the risk assessment techniques of financial institutions the Data Envelopment Analysis (DEA) tool will be use. Data envelopment analysis (DEA) is a linear programming based technique developed by Charnes, Cooper and Rhodes to measure the relative performance of organizational units where the presence of multiple inputs and outputs makes comparisons difficult. It measures operational efficiency through the creation of an efficient frontier of production based on an optimization programming to maximize a ratio of outputs to inputs. This approach produces an ordinal ranking by measuring the relative efficiency of the financial performance of a firm compared to those firms located on the efficient frontier. After solving an optimization programming for each firm within an estimation group, DEA analysis standardizes efficiency scores so that the most (least) efficient firms are assigned a value of one (zero). For the measurement of the risk assessment technique Enterprise risk management is used.

Data Gathering Procedures
The researchers will obtain a permission to conduct the study.

Next, the researchers will gather a list composed of the financial institutions listed in the Philippine Stock Exchange (PSE).

Next, the researchers will obtain the annual reports for the year 2015 of each respective financial institutions downloaded internet based.

Then, the researchers will generate a formula using MS Excel for the computation of the DEA.

Lastly, the researchers will gather the essential data to be used from each diversified company for the computation of its DEA, ROE and ROA. All the data will be gathered, analyzed, and interpreted thoroughly
Statistical Tool
The following statistical tools will be used in the study.

Mean. This will be used to determine the DEA, the ROA and the ROE of the financial institutions listed in PSE.

Regression. This will be used to determine the effect of risk assessment techniques, through DEA, to the financial performance of the financial institutions listed in the PSE.

Chapter 4
Results and Discussion
The financial performances of the financial institutions listed in PSE are presented in this chapter as well as the assessment of the level of efficiency of the risk assessment techniques that were used and their corresponding impacts. The results displayed include the descriptive statistics for standard deviation index, the level of efficiency of the risk assessment techniques and financial performance of the financial institutions were measured using Data Envelopment Analysis (DEA) for the year 2015 and the impact of risk assessment techniques on the financial performance among financial institutions listed in PSE.

Efficiency of Risk Assessment Techniques
Table 1. Descriptive Statistics of Risk Assessment Techniques
Indicator Min Max Mean SD SE Mean
Financial Risk 0.0425 1.6285 0.9252 0.3470 0.0776
Operational Risk -1.6400 4.9950 1.6210 1.5370 0.3440
Strategic Risk 0.0660 2.9970 1.1310 0.8160 0.1820
Table 1 are the descriptive statistics of different risk assessment techniques of the efficiency of financial institutions listed in the PSE. These indicators assessed the efficiency of the risk assessment techniques It shows that the mean of 20 financial institutions listed in PSE in 2015 were 0.9252 (Financial Risk), 1.6210 (Operational Risk), 1.1310 (Strategic Risk).
Furthermore, the operational risk has a standard deviation of 1.5270 which indicates that the data varied widely, followed by strategic risk, then by financial risk. This indicated that institutions have different risk assessment techniques.

Karagiorgos, Drogalas, Eleftheriadis and Christodoulou (2010) cited that in the present times, risk management are given more importance because of highly competitive global market. The 21st century shows improvement of risk assessment in various business fields.
These imply that the risk assessment techniques applied to minimize financial risk, operational risk and strategic risk by the financial institutions are efficient. This is further corroborated with the study of Ndung’u in 2013 where results showed that the major roles of financial risk management was identified as enhancing financial strength implementing and ensuring security in the companies. The financial risk management positively affects the financial performance of companies and that the gradually embracing financial risk management techniques as a tool for boosting the financial performance of Oil Companies in Kenya. In addition, many have shown that effective internal control mitigates risk and enhances the quality of internal control, no study has linked the effectiveness of internal control to the firm’s internal operations (Cheng et al., 2015)
Financial Performance of the Financial Institutions Listed in PSE
Table 2. Financial Performance of the Financial Institutions Listed in PSE
Indicator Min Max Mean SD SE Mean
ROA -0.1703 0.2237 0.0048 0.0684 0,0153
ROE -0.1330 8.5720 0.4730 1.9080 0.4270
Table 2 shows that the mean of 20 financial institutions listed in PSE in 2015 were 0.0048 (ROA), 0.4730 (ROE).
Omasete (2014) explained that the companies can say that a healthy financial performance are due to strategies that can detect potential problems that may affect the business financially and other matters.

Also, Njeri (2013) agreed with the previous statement by explaining that financial performance is the product of influence of risk management that is enhancing the provision of the financial statement.

However, the institutions ROA and ROE vary differently as seen in the figures of standard deviation. These are for the fact that there are financial institutions with negative net income that leads to negative ROA and ROE
These imply that there is the high financial performance in the financial institutions. In another study entitled ‘The impact of financial risks on profitability of Malaysian commercial banks: 1996-2005’, the relationship between bank capital and ROE is positive and as for the effect of bank capital on ROA, bank capital has a positive effect (Tafri et al., 2009). This will just justify the result of the test of financial performance of the financial institutions listed in PSE.

Impact of Risk Assessment Techniques on the Financial Performance of Financial Institutions Listed in PSE
Table 3.1. ROA Vs Financial Risk, Operational Risk, Strategic Risk (Model Summary)
Model R R2 Adjusted R2
ROA=-0.0099 – 0.0186 Financial + 0.0069 Operational +0.0812 Strategic 0.265 7.0% 0.0%
ANOVA
Source DF SS MS F P
Regression 3 0.006242 0.002081 0,40 0,753
Residual Error 16 0.082606 0.005163 Total 19 0.088849 Coefficients
Predictor Coef SE Coef T P Constant -0.00986 0.04932 -0.20 0.844 Financial -0.01861 0.06603 -0.28 0.782 Operational 0.00693 0.01154 0.60 0.556 Strategic 0.01821 0,02942 0.62 0.545 Table 3.1. shows the regression result of the effect of the risk assessment techniques to ROA. Among the techniques, the financialrisk has a negative effect on ROA while operational risk and strategic risk have a positive but insignificant effect on that ROA.

This can lead into failure to reject the null hypothesis of the study even though the risk assessment techniques applied to minimize financial risk, operational risk and strategic risk by the financial institutions are efficient and there are implications of high financial performance. Tafri et al. (2009) conducts a study where the result shows that the ROA is found to be positive but insignificant for the full sample and the sub samples of conventional and Islamic banks.

Table 3.2. ROE Vs Financial Risk, Operational Risk, Strategic Risk
Model R R2 Adjusted R2
ROE=1.47 – 1.90 Financial – 0.068 Operational +0.766 Strategic 0.261 6.8% 0.0%
ANOVA
Source DF SS MS F P
Regression 3 4.698 1.566 0.39 0.763
Residual Error 16 64.500 4.031 Total 19 69.199 Coefficients
Predictor Coef SE Coef T P Constant 1.473 1.378 1.07 0.301 Financial -1.899 1.845 -1.03 0.319 Operatinal -0.0679 0.3226 -0.21 0.836 Strategic 0.7659 0.8220 0.93 0.365 Table 3.2. shows the regression result of the effect of the risk assessment techniques to ROE. Among the techniques, only the strategic risk has a positive effect on ROE but insignificant effect on the ROE
This can lead into failure to reject the null hypothesis of the study even though the risk assessment techniques applied to minimize financial risk, operational risk and strategic risk by the financial institutions are efficient and there are implications of high financial performance. Tafri et al. (2009) suggests ROE is found to be negative for the aggregate data of all banks and the disaggregate data of conventional banks and positive for the Islamic banks however, the effect is insignificant corroborating this study result.

The last purpose of the study is to determine the impact of Risk assessment techniques on the financial performance among financial institutions listed in PSE.

Both Table 3.1. and Table 3.2. shows that risk assessment techniques have no impact on the financial performance of the financial institutions listed in the PSE. The dependent indicator ROA and ROE gives a R value equal to 0.265 and 0.261, and the independent indicator risk assessment techniques in financial risk, operational risk, and strategic risk gives a P value more than 0.05.
Cheng, Goh and Kim (2015) provided results of operational efficiency, derived from the frontier analysis, is significantly lower among firms with material weaknesses in internal control relative to firms without such weaknesses; their conclusion is that risk assessment techniques had lower relationship. However, in the study of Njeri (2013), it was found that effective risk management would lead to increase in ROA and ROE. Thus, there is an existence of positive relationship between risk management and financial performance.

These leads to an interpretation that there is a no significant relationship between the risk assessment techniques and the financial performance of the financial institution listed in PSE. Githinji (2010) did a study on Credit Risk Management and Profitability of Commercial Banks in Kenya and he found out that there was no relationship between profits, amount of credit and the level of nonperforming loans. However, Grace (2012) assessed the effect of credit risk management on the financial performance of commercial banks in Kenya and showed that there is a significant relationship between performance in terms of profitability and credit risk management. At the present moment, the financial institutions in Philippines are still in their infancy stage, hence the study could not employ the dynamic models effectively, however, it is possible to extend the study period in the future.

Chapter 5
Findings, Conclusions and Recommendation
This chapter presents the summary or the research work undertaken, the conclusions drawn, and recommendations based on the data analyzed in the previous chapter. This study was taken with the general objective of determining the relationship of the financial performance of financial institutions listed in PSE and the risk assessment techniques used.

Summary of Findings
From the analysis of data, the findings were as follows:
The Efficiency of the Techniques showed that Operational Risk had the most established risk management with a Minimum of -1.6400 and a Maximum of 1.6210 while the Financial Risk had the least established risk management with a Min. of 0.0425 and a Max. of 1.6285 and the Strategic Risk had a Min. of 0.0660 and a Max. of 1.1310.
The financial performance of the financial institutions listed in PSE showed that they have good financial performance, resulting to a high mean of the ROA and ROE in which ROA resulted to a Minimum of -0.1703 and a Maximum of 0.2237 and ROE resulted to a Minimum of -0.1330 and a Maximum of 8.5720
It was found out that the dependent indicator ROA and ROE has no significat impact on the independent indicator risk assessment techniques in financial risk, operational risk, and strategic risk. Thus, null hypothesis is accepted.

Conclusion
This study investigates the impact of risk assessment techniques in the financial performance of financial institutions listed in PSE. Based on the foregoing results, the paper proposes that there is no significant relationship between the risk assessment techniques and the firm’s financial performance, particularly, the ROA and ROE. This indicates that there is a failure to reject the null hypothesis of this study. These results suggest that risk assessment techniques are not sufficient to be considered as a criterion in increasing the companies’ financial performance. Olamide, Uwalomwa and Ranti (2015) suggested that effective risk management in financial institutions reduces the occurrence of systemic and economic breakdown, but this does not guarantee increase in the returns on equity. Kokobe and Gemechu (2016), on the other hand, claims that companies should adopt risk management and risk management techniques effectively so as to improve on their return on equity and reducing loss ratios This study concludes that risk assessment techniques has no impact on the financial performance of financial institutions listed PSE.

Recommendation
In the conduct of the study, the following recommendations are as follow:
The Philippine Stock Exchange may require the companies to present or disclose the relationship of their risk management to the financial performance to further achieved their commitment if protecting the investment of the public, and developing and maintaining an efficient, fair, orderly and transparent market.

The stockholders may examine different financial ratios such as ROA and ROE for their future investments. Also, these investors should take into consideration established risk assessment techniques it is a contributing factor in the financial performance.

The management of the financial institutions may take into consideration their risk assessment techniques as a possible indicator of good financial performance. Therefore, the management should establish a well-round risk management in financial, operational and strategic areas since it has a significant positive effect in the return on asset and equity.

The University of Mindanao may establish a uniform understanding of risk assessment techniques that is encompassing, universal and measurable. The academe may introduce this topic to their faculties and students for further studies, thereby increasing the available literature of risk assessment techniques
The future researchers may further investigate and establish relationship between risk assessment techniques and other profitability ratios such as earnings per share, profit margin, etc. Moreover, they can change the respondents with a more specific field of business or increase it using a much bigger scope
References
Basel Committee on Banking Supervision. (2003). Trends in risk integration and aggregation. Retrieved on January 5, 2017 from http://www.bis.org/publ/joint07.htm
Akindele, R. (2012). Risk management and corporate governance performance empirical evidence from Nigerian banking sector. Ife PsychologIA, 20(1), 103-120.

Alkassim, R.S., Etikan, I., &Sulaiman, Musa A. (2016). Comparison of convenience sampling and purposive sampling. American Journal of Theoretical and Applied Statistics,5(1), 1-4. Retrieved on May 10, 2-17 from http://dx.doi.org/10.11648/j.ajtas.20160501.11
Ariff, M.S.B.M., Ishak, N., & Ismail, K. (2014). A framework for risk management practices and organizational performance in higher education. Review Integrated Business and Economics Research, 3(2), 422-432. Retrieved on November 19, 2017 from http://buscompress.com/uploads/3/4/9/8/34980536/riber_b14-179__422-432_.pdf
Ashbaugh?Skaife, H., Collins, D. W., & Lafond, R. (2009). The effect of SOX internal control deficiencies on firm risk and cost of equity. Journal of Accounting research, 47(1), 1-43. Retrieved on January 5, 2017 from http://dx.doi.org/10.1111/j.1475-679X.2008.00315.x
Ashbaugh-Skaife, H., Collins, D. W., Kinney Jr, W. R., &LaFond, R. (2008). The effect of SOX internal control deficiencies and their remediation on accrual quality. The Accounting Review, 83(1), 217-250. Retrieved on January 6, 2017 from  http://dx.doi.org/10.2308/accr.2008.83.1.217
Association of Chartered Certified Accountants. (2012). Rules for risk management: Culture, behaviour and the role of accountants. Retrieved on December 10, 2016 from http://www.accaglobal.com/content/dam/acca/global/PDF-technical/corporate-governance/tech-afb-rrm_exec2.pdf
Babbel D.F. &Santomero, A.M. (1996). Risk management by insurers: An analysis of the process. Wharton Financial Institution Care. Retrieved on January 6, 2016 from http://fic.wharton.upenn.edu/fic/papers/96/9616.pdf
Beneish, M. D., Billings, M. B., & Hodder, L. D. (2008). Internal control weaknesses and information uncertainty. The Accounting Review, 83(3), 665-703. Retrieved on January 5, 2017 from http://dx.doi.org/10.2308/accr.2008.83.3.665
Cebenoyan, A.S., &Stratahan, P.E. (2004). Risk management, capital structure and lending at banks. Journal of banking and finance, 28, 19-43. Retrieved on January 5, 2017 from http://fic.wharton.upenn.edu/fic/papers/02/0209.pdf.

Cheng, M., Dhaliwal, D., & Zhang, Y. (2013). Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?. Journal of Accounting and Economics, 56(1), 1-18. Retrieved on January 5, 2017 from http://dx.doi.org/10.1016/j.jacceco.2013.03.001
Cheng, Q., Goh, B.W., & Kim J.B. (2015). Internal control and operational efficiency. Research Collection School of Accountancy. Retrieved on July 10, 2017 from http://ink.library.smu.edu.sg/soa_research/1392Doyle, J., Ge, W., &McVay, S. (2007). Determinants of weaknesses in internal control over financial reporting. Journal of accounting and Economics, 44(1), 193-223. Retrieved on January 5, 2017 from http://dx.doi.org/10.1016/j.jacceco.2006.10.003
Feng, M., Li, C., &McVay, S. (2009). Internal control and management guidance. Journal of Accounting and Economics, 48(2), 190-209. Retrieved on January 5, 2017 from http://dx.doi.org/10.1016/j.jacceco.2009.09.004
Gakure, R.W., Ngugi, J.K., Ndwiga, P.M., &Waithaka, S.M. (2012). Effect of credit risk management techniques on the performance of unsecured bank loans employed commercial banks in Kenya. International Journal of Business and Social Research, 2 (4), 221-236. Retrieved on December 10, 2016 from http://thejournalofbusiness.org.

Gardner, D. and Wright, J. (2014). Chapter 12: Project Finance, HSBC, 2014 http:// www.hsbcnet.com/gbm/attachments/products-services/financing/project-finance.pdf.

Githinji, A.M. (2010). Effects of financial risk management on financial performance of commercial banks in Kenya. Retrieved on November 18, 2017 from http://erepository.uonbi.ac.ke:8080/bitstream/handle/11295/100381/Githinji_Effects%20Of%20Financial%20Risk%20Management%20On%20Financial%20Performance%20Of%20Commercial%20Banks%20In%20Kenya.pdf?sequence=1&isAllowed=y
Grace, N.M. (2012). The effect of credit risk management on the financial performance of Commercial banks in Kenya. Retrieved on November 18, 2017 from http://erepository.uonbi.ac.ke/bitstream/handle/11295/94687/Githaiga-Effects%20Of%20Credit%20Risk%20Management%20On%20The%20Financial%20Performance%20Of%20Commercial%20Banks%20In%20Kenya?sequence=1
Guinigundo, D.C. (2005). The Philippine financial system: issues and challenges. BIS Papers, 28, 295-311. Retrieved on December 12, 2016 from https://core.ac.uk/download/pdf/7354061.pdf.

Hassan, A. (2009). Risk management practices of Islamic banks of Brunei Darussalam. The Journal of Risk Finance, 10(1), 23-37. Retrieved on January 6, 2017 from http://www.emeraldinsight.com/doi/full/10.1108/15265940910924472
Hayali, A., Dinç, Y., Sar?l?, S., Dizman, A.S., & Gündo?du, A. (2012). Importance of internal control system in banking sector: Evidence from Turkey. Retrieved on December 12, 2016 from http://www.lcbr-archives.com/media/files/13fec27.pdf
Hussain, H., & Al-Ajmi, J. (2012). Risk management practices of conventional and Islamic banks in Bahrain. The Journal Of Risk Finance, 13(3), 215-239. Retrieved on January 6, 2017 from https://www.scribd.com/document/217370093/Risk-Management-Practices-of-Conventional-and-Islamic-Banks-in-Bahrain.

Joint Committee of Structural Safety. (2008). Risk assessment in engineering, principles, system representation and risk criteria. Retrieved on December 12, 2016 from  http://www.jcss.byg.dtu.dk/~/media/Subsites/jcss/english/publications/risk_assessment_in_engineering/jcss_riskassessment.ashx?la=da.

Karagiorgos, T., Drogalas, G., Eleftheriadis, I., & Christodoulou, P. (2010). Efficient risk management and internal audit. Journal of Business Management, 2 (1). Retrieved on July 10, 2017 from https://www.researchgate.net/publication/265626193.

Kim, J. B., Song, B. Y., & Zhang, L. (2011). Internal control weakness and bank loan contracting: Evidence from SOX Section 404 disclosures. The Accounting Review, 86(4), 1157-1188. Retrieved on January 5, 2017 from http://dx.doi.org/10.2308/accr-10036
Kolapo, T.F., Ayeni, R.K., &Oke, M.O. (2012). Credit risk and commercial banks’ performance in Nigeria: A panel model approach. Australian Journal of Business and Management Research, 2(2), 31-38. Retrieved on December 10, 2016 from http://ajbmr.com/article.

Mendoza, E.G., Quadrini, V. (2010). Financial globalization, financial crises and contagion. Journal of Monetary Economics, 57, 24-39. Retrieved on November 15, 2016 from https://www.sas.upenn.edu/~egme/pp/JME2010.pdf
Mohua, R., Rekha M., & Sangita M. (2006). A review of cross-country experience in capital account liberalisation. Reserve Bank of India Occasional Papers, 27(2). Retrieved on December 5, 2016 from http://services.iriskf.org/data/articles/Document11012007580.1248133.pdf.

Mugenda, M.O. & Mugenda, A. (2006), Research Methods: Qualitative and Quantitative Approaches, Acts Press, Nairobi.

Musyoki, D., & Kadubo, A.S. (2012). The impact of credit risk management on the financial performance of Banks in Kenya for the period (2000-2006). International Journal of Business and Public Management, 2 (2), 72-80. Retrieved on December 10, 2016 from http://mku.ac.ke/journals.

Njeri, K. (2013). Effect of risk based audit on financial performance of deposit taking microfinance institutions in Kenya. Retrieved on July 11, 2017 from https://www.uonbi.ac.keNdung’u, A.W. (2013). Effect of financial risk management on financial performance of oil companies in Kenya. Retrieved on November 20, 2017 from http://chss.uonbi.ac.ke/sites/default/files/chss/EFFECT%20OF%20FINANCIAL%20RISK%20MANAGEMENT%20ON%20FINANCIAL%20PERFORMANCE.pdf
Ogneva, M., Subramanyam, K. R., &Raghunandan, K. (2007). Internal control weakness and cost of equity: Evidence from SOX Section 404 disclosures. The Accounting Review, 82(5), 1255-1297. Retrieved on January 5, 2017 from http://dx.doi.org/10.2308/accr.2007.82.5.1255
Omasete, C.A. (2014). The effect of risk management on financial performance of insurance companies in Kenya. Retrieved on July 11, 2017 from https://www.uonbi.ac.ke
Organization for Economic Cooperation and Development. (2014). Risk management and corporate governance, corporate governance. OECD Publishing, Paris. Retrieved on December 10, 2016 from http://www.oecd-ilibrary.org/governance/risk-management-and-corporate-governance_9789264208636-enPhilippines. (2002). Special Purpose Vehicle Act. Quezon City, Metropolitan Manila, Philippines. Retrieved on December 10, 2016 from https://www.lawphil.net/statutes/repacts/ra2002/ra_9182_2002.html
Poudel, R.P. (2012). The impact of credit risk management on financial performance of commercial banks in Nepal. International Journal of Arts and Commerce, 1 (5),9-15. Retrieved on December 10, 2016 from http://www.ijac.org.uk/images.

PricewaterhouseCoopers (2009). Seizing opportunity: Linking risk and performance. Retrieved on January 6, 2017 from https://www.pwc.com/us/en/risk-performance/assets/pwc-risk-performance-2009.pdf.

Rhyne, E., and Busch B. (2006). The growth of commercial microfinance: 2004 – 2006. Retrieved on November 15, 2016 from https://centerforfinancialinclusionblog.files.wordpress.com/2011/10/the-growth-of-commercial-microfinance-2004-2006.pdf.

Schmukler, S. L. (2004). Benefits and risks of financial globalization: challenges for developing countries. Globalization, Growth, and Poverty, World Bank Policy Research Report. Retrieved on December 12, 2016 from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.511.9274&rep=rep1&type=pdfTafri, F. H., Hamid, Z., Meera, A. & Omar, M. A. (2009). The impact of financial risks on profitability of Malaysian commercial banks: 1996-2005.World Academy of Science, Engineering and Technology International Journal of Economics and Management Engineering, 3(6), 1320-1334.Retrieved on November 20, 2017 from http://waset.org/publications/5446/the-impact-of-financial-risks-on-profitability-of-malaysian-commercial-banks-1996-2005
Tamás-V?neki, Z., Báthory, C. (2017). Bank model risks incorporated into the operational risk management process. Public Finance Quarterly, 1, 101-117. Retrieved on January 3, 2018 from http://unipub.lib.uni-corvinus.hu/2864/1/tamasne_2017_1_a.pdf.

Tandelilin, E., Kaaro, H., Mahadwartha, P.A., & Supriyatna, S. (2007). Corporate governance, risk management, and bank performance: Does type of ownership matter? East Asian Development Network, 34. Retrieved on January 5, 2017 from  http://eadn.org/files/Working%20Papers/WP_34_Eduardus_Tandelilin_Corporate_Governance_Risk_Management.pdf.

University of Cambridge Institute for Sustainability Leadership. (2014). Stability and sustainability in banking reform: Are environmental risks missing in Basel III? Retrieved on November 19, 2017 from www.cisl.cam.ac.uk
Wanjohi J.N., &Ombui K. (2013). Effects of risk management practices on the performance of insurance firms in Kenya: A case of AIG Insurance Company Ltd. International Journal of Science and Research, 2(9), 390-394. Retrieved on December 5, 2016from https://www.ijsr.net/archive/v2i9/MzAwODEzMDQ=.pdf.

Wenk, D. (2005). Risk management and business continuity, overview and perspective. Journal of the chartered insurance institute, 3(3), 234-246.

World Economic Forum. (2008). Global risks 2008: A global risk network report. Geneva, Switzerland. Retrieved on January 5, 2017 from https://www.stat.berkeley.edu/~aldous/157/Papers/WEF_GlobalRisks_Report_2008.pdf