Empirical Testing of Risk Management in Financial Performance in Indonesian Islamic Rural Bank

Abstract

The study aims to determine the effect of risk management that is proxied by operational risk, credit risk, and liquidity risk on financial performance in BPRS in Indonesia. The approach used a quantitative approach. This type of research was explanatory research that explained the causal relationship between the independent variables toward the dependent variable. This study used secondary data types taken from Islamic banks, especially the Islamic Rural Bank (BPRS) in Indonesia. This study's variables included independent risk management variables as measured by NPF and operational risk with BOPO. At the same time, the dependent variable was measured by ROA. The results showed that risk management proxied by financing risk or NPF and operational risk (BOPO) had a significant effect on financial performance. NPF had a significant negative effect on financial performance (ROA). BOPO had a significant effect on financial performance (ROA).