Balance Between Risk And Profit In The Context Of Strategic Management: The Example Of Ukrainian Banks

Abstract

The article explores the issues of strategic management of banks, the formation of long-term strategic goals, in particular – the construction of an effective financial strategy of the bank aimed at finding a balance between the need for risk minimization and profit maximization. Balanced risk and return management should protect economic entities from potential income shortfalls or a reduction in the market value of capital due to adverse effects of external or internal factors, from losses that can be both direct (loss of income or capital) and indirect (investment). the ability to achieve your business goals). The article presents the author’s own approach to the calculation of the taxonomic method of the bank’s integrated risk and profitability indicators, as well as the results of matrix analysis, which made it possible to trace the bank’s risk/profit ratio. All Ukrainian banks are selected as the subject of study, and the first three quarters of 2018 are the time horizon. Economic norms and limits of open currency position on regulation of banking activity by the National Bank of Ukraine were selected to assess the level of riskiness of the bank, and the main indicators of bank profitability (total level, cost recovery, return on assets, total capital, net interest margin) were selected for profitability level. The study empirically confirms that risk management in Ukrainian banks is at a critical level and profit management is at medium and low levels. Basically, banks are characterized by a focus on profit maximization, eliminating high-risk activity. The risk-reward strategy is chosen by a small number of Ukrainian banks and profit maximization is rare enough for Ukrainian banks. Keywords: strategy, bank, strategic management, risk management, profit management, taxonomic analysis, matrix analysis.