IMPACT OF RISK MANAGEMENT ON THE PROFITABILITY OF INSURANCE COMPANIES IN NIGERIA
Idris Haruna , Umar Salim Ibrahim , Jamilu Madaki and Abdullahi Zahradeen Musa
Volume 13 Issue 2
Abstract
The primary objective of all established businesses is profit, and profitability is a key metric for assessing the effectiveness of financial organizations globally. This study examines the impact of risk management practices on the profitability of insurance companies in Nigeria. A descriptive and inferential research design was adopted. Data were collected via questionnaires from 60 employees across five sampled insurance companies, selected from a population of all 58 insurance companies in Nigeria, and analyzed using SPSS version 23.0. Regression analysis revealed that financial risk management practices account for approximately 86.53% of the variation in profitability, while operational risk management practices account for 69.35%. Furthermore, a strong positive correlation (r = 0.94154) was found between strategic risk management practices and profitability. The study concludes that effective risk management in its financial, operational, and strategic dimensions profoundly influences the profitability and sustainability of insurance companies in Nigeria. It is recommended that insurance companies should continuously evaluate and enhance their risk management frameworks, leverage technology for risk assessment, and invest in employee training to foster a robust risk culture, thereby safeguarding and improving financial performance. Keywords: Risk Management, Profitability, Insurance Companies, Financial Risk, Operational Risk and Strategic Risk.
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