Determining the relationship between transformational leadership and risk management in the retail bank.

Abstract

Risk Management is one of the challenges facing the banking industry, after 2008 financial crisis the banking industry has become one of the heavily regulated industries. This study intended to determine the association between transformational leadership and risk management. Appiah-Adu and Amaoko (2016) state that performance of the bank on risk management has leaders influence, as leaders are able to foresee the future and avoid the risk before it happens. Uddin, Fan & Das (2017) mention that the leadership style that has a positive influence on the organization performance is transformational leadership. This was a cross sectional study conducted among 42 employees who were working in the retail bank. Population consists of 60 managerial staff employees who were drawn from the retail bank in Durban, KwaZulu-Natal, South Africa. Census survey was employed for this study. Kumar (2014) mentioned that quantitative researchers gather data using instruments that can easily be converted to numbers. The research method employed for this study is quantitative approach. Data was collected using self-administered questionnaire. Statistical analysis revealed that there was a significant relationship between transformational leadership and risk management. One of the features of this study is that majority of participants perceive themselves as transformational leaders, however, strongly believe in transactional leadership style. It is recommended that managers adopt the transformational leadership style to improve followers’ performance. Mhatre and Riggio (2014) mention that subordinates perform well under the appropriate leadership behaviours and leader’s style. Transformational leader elevates the followers to act at the best interest of the organisation and become aware of the importance of risk management. The study can assist bank managerial employees to apply the relevant style when dealing with their followers to mitigate risk in the bank. Efficient risk management depends on the effectiveness of the leader. Sun & Wang (2014) mention that 2008 financial crisis is a strong evidence that poor risk management is detrimental to the bank performance. The results can assist human resource development team to identify gaps on banks’ managerial employees’ development plan.