Banking Industry - Part 4


Chapter 3. Research Methodology

3.1 Introduction

The chapter of research methodology discusses methodically designed and used in conducting research. In order to successfully account important areas of the research within available resources the research methodology systematically describes path to be followed (Crabtree, 1992). The research methodology is considered as well defined if it gives theoretical and philosophical suppositions measured for designing the research course. Additionally, it also highlights the boundaries or restrictions appropriate to research due to the approaches and methods used (Beiske, 2007).

Under development research methodology is a guideline for the research entitled “Dynamic management of the market risk in bank”.

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3.2 Purpose of the Study

Banking sector is the industry with extensive risk in its operations due to which there is a strong need of accurate forecasting to face the upcoming challenges of varying market. Some factors that influence the market in unfavorable direction include different types of risks such as credit risk, market risk, operational risk, environmental risk and regulatory risk. In the presence of all these factors in the market, there is consistent need of containing and improving process of risk management (Bessis, 2011).

The need of various types of risk management approaches has become highly important particularly after the disasters in the financial and non-financial firms along with the governmental agencies. The factors of uncertainty are increasing along with the variation in other influencing factors. The most influencing factors that create a risk in the banking sector include credit risk, market risk, operational risk, regulatory risk and environmental risk (Cebenoyan & Strahan, 2004).

Risk management emphasizes on the reality that the continued existence of a bank depends greatly on its potential to forecast and get ready for the change rather than waiting for the changing conditions and respond to it. The purpose of risk management is not to forbid or avoid risk taking actions, but to make sure that the risks are deliberately taken with complete information, purpose and obvious understanding so that it can be calculated and alleviated. It also secures a bank from suffering improper loss causing a bank to experience reputational loss (Elsinger, Lehar, & Summer, 2006). After the financial crisis, there has been an increased attention on importance of risk management and therefore this study is aimed at highlighting important aspect in risk management in organization (Gundlach & Lehrbass, 2004).

3.3 Research Questions

Research questions control the possibility of deviation in the research process and these questions make sure that the research is according to the designed standards and study continues to explore only defined scope. The questions are designed with the objective of determining the boundary of the research study (Bernard, 2011). The questions that underlying research is aimed at responding are as follows:

  • Different types and kinds of risk exists in the banking industry?
  • If the risk factors are dynamically managed do they offer some additional security against risk?
  • What role does different players in the banking and associated structure play in managing the risk dynamically?
  • How significant is dynamic risk management in the objectives attainment in an organization?

3.4 Conceptual Framework

The conceptual framework is the body of the research that is designed with the references of the literature review. Sekaran (2006) has defined conceptual framework as system to permit the researcher to understand, illustrate and summarize insights developed as consequences of the research. The conceptual framework for this research can be stated as follows.

3.5 Research Approach and Strategy

Babbie (2010) has recognized that every research falls in the category of deductive or inductive approach. Snieder and Larner (2009) have positioned that the deductive approach is one in which research is based on a reasoning supported by the theory. The proposition or hypothesis is then used to be tested in research (Goddard & Melville, 2004). Opposing to this, when the theory is developed as a consequence of the observation being tested in the research, then the approach is known as inductive research (Stewart, 1993).

In the underlying study or research, inductive approach is being used. The research undertakes the ways for dynamic management of risks on the banking sector. The factors of risk are changing with the changing environment so to make variations or adjustments in its risks techniques and framework to manage the changing risk in the market has become critical. The competitive environment also encourages banks to constantly assess factors affecting risk for maintaining the sustainability in the banking industry. Hence, the research is following an inductive approach, the research has attempted to explore the current dynamics in risk management in banking sector.

3.6 Data Collection And Analysis

Data collection is considered as the most important part in the research methodology section. Both sources of data; primary data and secondary data are used in this research study. Secondary data is based on the already collected and assessed data forming the part of literature review and the development of conceptual framework (Saunders, Thornhill, & Lewis, 2009). The secondary data has been collected from the research journals, books, published reports as well as literature developed by professional organizations. On the other hand, primary data is also used to collect information. Primary data is used to collect firsthand information. Primary data is collected by the researcher (Maylor & Blackman, 2005).

The data collection method used in the primary data collection is the questionnaire based. Organized questionnaire has been designed to gather the answers from the bankers and professionals that are working in the banking industry. Questionnaire contains close ended questions related to the dynamic management of risk by factors that form the risk management framework for a bank. This includes the role of top management, tools, organizational structure and others. Data by questionnaire is collected with the aim of finding the impact of dynamic management in managing the market risk and to analyze whether the findings from secondary data are in accordance with the collected data or not.

The population for the underlying research includes all bankers and financial professionals that directly or indirectly deal with risk in bank. However, due to resource constraint the research has accounted sample of 40 bankers and professionals in banking industry to participate in study and provide their responses to questionnaire.

Appraisal of the collected data will be performed by descriptive analysis statistical techniques.

3.7 Ethical Consideration

Each research compulsorily has requisite to follow the ethical standard to put in value to the validity of the research. The clearly defined ethical deliberations also allow researcher to gather more authentic and inclusive data from participants and then use that data in making the authentic research report (Patton, 2002).

The researcher to talk to the ethical thoughtfulness has taken following actions:

  • Taken approval from the targeted audience for using provided data for research with defining goals.
  • Give promise of not using the given information for any other reason than fundamental research.
  • Assurance of keeping provided information will be reserved in full privacy.

3.8 Limitations

Research entitled “Dynamic management of the market risk in banks” has attempted to deal with the all essential features for making fundamental research an important addition to the banks and academic literature. Despite comprehensive approach, all areas cannot be addressed in detail and this would result in limiting the findings of the research. These limitations have been defined as follows:

  • The responses based on questionnaires might also not give inclusive information as participants are likely to skip questions unattended if they face complexity in understanding questions.
  • The sample size for the study was significantly small which may influence the findings and it is one of the important limitations of the study.
  • The study has developed results based on the overall review of working factors where each of the factors constitutes a complete field itself. Hence, limit the result of the study.

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3.9 Summary

The research methodology is designed to provide a researcher systematic developed guidelines for the research project. Research methodology provides a road map to the researcher with set of clear instructions to be chased for conducting the research within provided resources. The methodology set the standards for the researcher to avoid deviations occurred in the process and contain the research on the initially designed structure. This structure contains the researcher in a single direction and outcomes developed with authenticity.

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