AN ANALYTICAL STUDY OF THE RELATIONSHIP BETWEEN RISK MANAGEMENT AND FINANCIAL PERFORMANCE
DOI:
https://doi.org/10.29121/ShodhPrabandhan.v2.i2.2025.55Keywords:
Risk Management, Financial Performance, Risk Assessment, Profitability, Liquidity, Solvency, Corporate Governance, Risk Mitigation, Market Uncertainty, Organizational Sustainability, Regression Analysis, Financial StabilityAbstract
The further sophistication of the financial market itself has contributed to embracing the importance of effective risk management as a strategic tool that can guarantee its sustainability and future financial prosperity in the organization. The following paper provides the review of the correlation between risk management practice in the selected companies and financial performance. The study evaluates the key aspects of the risk management process, along with the identification, evaluation, mitigation, monitoring, and adherence to the primary, and secondary data and their impact on financial outcomes, i.e., profitability, liquidity, solvency, and return on investment. These relationships were estimated and their strength and magnitude of the relationship studied using statistical techniques like correlation, regression analysis. According to the results, banks which possess properly developed and properly co-ordinated risk management systems have higher chances of positive financial performance and become bastions against the forces of divergence in the market. It is found in the research that proactive risk management must be part of corporate governance to enhance financial performance as well as sustainability in the long run. Recommendations are made as how companies may improve the robustness of risk management processes so as to be in a stronger financial position and competitive position.
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