THE IMPACT OF INTERNAL CONTROL SYSTEMS ON FINANCINCIAL PERFORMANCE OF COMMERCIAL BANKSPIAL

Abstract

This study examines how internal control mechanisms affect commercial banks' financial performance, concentrating on Opportunity Bank Uganda Limited's MukonoBranch. The main goals were to determine the relationship between different internal control mechanisms and overall financial stability as well as the impact these controls have on financial performance measures like Return on Equity (ROE) and Return on Assets (ROA). This study was conducted with three main goals in mind: to identify the relationship between internal controls and financial performance in the context of the research, to assess the contribution of various internal control systems to financial performance, and to investigate the various internal control systems used by commercial banks. Regression and correlation analyses were used in the study's cross-sectional research design to examine the data. Important conclusions show that commercial banks have robust internal control frameworks, especially when it comes to communication and risk assessment. On the other hand, there appears to be some variation in the efficiency of technology security measures and information sharing, indicating potential for enhancement. According to the research, internal control systems and financial performance are often positively correlated. Strong risk assessment practices and supportive corporate cultures can help make the financial system more stable. Nevertheless, operational effectiveness and financial performance are impaired by control failures with respect to the deployment of effective business rules and the transmission of objective data on operating progressives. The report covers a number of recommendations, such as investing in stateoftheart technology to improve internal control processes; adopting agile controls that recognize the differences in individual operational risks and mitigations; further enhancing Control Activities and Communication Channels. By focusing on these aspects, commercial banks can embed their internal control environment into the enterprise using a continuous performance process and gain improved operational efficiency leading to healthier financial outcomes.