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All forms of economic activities are confronted with risks. Some of these risks, both internal and external, involve huge losses that could deprive a firm from its continuity if the proper management is not put in place. These days, managing risk has become a matter of necessity. This thesis looks at risks faced by firms in the financial sector in Nigeria , how these risks are managed and the systems of control used to mitigate them using Zenith bankof Nigeria as a case study. Risk has been defined as “uncertain future events that could influence the achievement of the organization’s strategic, operational and financial objectives” (IFA, 1999). “Risk can be defined as the combination of the probability of an even and its consequences” (IRM et al., 2002).


The aim of every profit-making organization is to earn profit, stay in business for a long time, meet customers’ demand and expectations, pay their debts when they fall due and satisfy the aims of stakeholders. These objectives are easily achieved if the owner and manager of the company is the same person. However, as the business grows and expands, the need for additional employees arises and the owner employs more and more people to help manage the company. This gradually results in what is called in business terms “separation of ownership and control” (Smith, 1776). At this point, the owner realizes that precautions must be taken to protect the company as well as the interest of the owner. The issue of ownership and control becomes more complicated if a company is big and listed on a recognized stock exchange. That is, a company with much more capital investment both in cash, assets and personnel. Thus, the owners need an assurance that the intended objectives of the company would be achieved, assets of the company would be protected from theft and mismanagement, the accounting information would be received on time and that they would be accurate and reliable.

The weaknesses of many companies’ control systems have been highlighted due to the big financial scandals of recent years (between 2001 and 2003) and as a result increased attention on risk management, internal controls, internal audit and their role in modern organizations. The implementation of the Sarbanes-Oxley Act 2002 (SOX), which was enacted by the US Congress, in response to a number of major corporate and accounting scandals including those affecting Enron Corporation, Tyco International, WorldCom and others, is an evidence of major steps taken by governments to revise company regulations (Coates, 2002).

Risk management is “a process of understanding and managing the risks that the entity is inevitably subject to in attempting to achieve its corporate objectives. For management purposes, risks are usually divided into categories such as operational, financial, legal compliance, information and personnel. One example of an integrated solution to risk management is enterprise risk management” (CIMA, 2005). Effective risk management involves risk assessment, risk evaluation, risk treatment and risk reporting. The focus of good risk management is the identification and treatment of these risks in accordance with the organization’s risk appetite. These risks need to be managed and controlled in order to prevent vibrant organizations from catastrophic losses and help them achieve their goals and objectives.

An organization needs to understand its mission and articulate it clearly. This makes it easier to recognize the risks associated with the mission. Once an organization identifies its mission, it can begin its risk assessment by listing the possible risks that threaten the business with the aim of identifying high priority risks and focusing on those first. 

Internal control on the other hand, is “the whole system of controls, financial and otherwise, established in order to provide reasonable assurance of: (a) effective and efficient operation;

(b) internal financial control; (c) compliance with laws and regulations” (CIMA, 2006) 

The formality, structure and nature of a company’s system of internal control will generally vary with the type of sector or industry, size of the company and the level of public interest in it. Since profits are in essence the reward for successful risk-taking, the purpose of an internal control system is to help manage and control risk appropriately rather than to eliminate it as indicated in the Turnbull Report (ICAEW, 1999). Thus, control mechanisms should be incorporated into the business plan and embedded in the day-to-day activities of the company.


Risk is inherent in every economic activity and every organization has to manage it according to its size and nature of operation because without risk management no organization can survive in the long run. This is because businesses today are faced with far greater challenges than before due to the fact that economical, technological and legal interdependence are becoming more prevalent and pronounced. It would be assumed that risk management and internal control systems will vary from organization to organization based on their size or industry sector. It is therefore logical to assume that every business organization has put in place a strong risk management structure and internal control systems to help achieve its goals. These are fundamental to the successful operation and day-to-day running of a business and assist a company in achieving its objectives. 

Risk may affect many areas of activity, such as strategy, operation, finance, technology and environment. In terms of specifics, it may include, for example, loss of key staff, substantial reductions in financial and other resources, severe disruptions to the flow of information and communication, fires or other physical disasters, leading to interruptions of business and or loss of records. More generally, risk also encompasses issues such as fraud, waste, abuse and mismanagement. In light of this, it is expedient to find out more about the risks that threaten the operations of Zenith bankof Nigeria, an institution in the financial sector and listed on Nigeria stock market, which risk management and internal control systems are put in place, how these control measures facilitate the smooth running of the company in achieving its objectives and goals, the impact of risk management and internal control systems on the profitability and sustainability of Zenith bankof Nigeria.


The hypotheses for this thesis are:

a)      Risk management and internal control systems exist in Zenith bankof Nigeria.

b)      The risk management and internal control systems are being complied with by Zenith bankof Nigeria.


As mentioned earlier, it is hypothesized that risk management and internal control systems exist in Zenith bankof Nigeria and that they are being complied with. The question however is if these systems of control exist:

a)      What kind of risks is the company exposed to? 

b)      What kind of risk management structures and internal control systems exist in the company to control these risks?

c)      To what degree are the risk management and internal control system complied with by Zenith bankof Nigeria?


This thesis aims to achieve the following objectives:

a)      To find out those risks that  threaten the operations of Zenith bankof Nigeria.

b)      To find out the impact of these risks on the financial performance of Zenith bankof Nigeria.

c)      To find the risk management and internal control systems put in place by Zenith bankof Nigeria.

d)     To find out how these control systems have impacted on the performance of Zenith bankof Nigeria.


This thesis is limited to the study of Zenith bankof Nigeria in the financial sector of the Norwegian economy. The study is concentrated on accounts/finance, internal control, administration, human resources and insurance departments. The reason for choosing these departments is that they are more knowledgeable and responsible for risk management and internal controls in Zenith bankof Nigeria.

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