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Understanding of the research methodology
This chapter presents the reader clearly understanding of the research methodology and relevant research approaches determining the way through this research was conducted. In accordance with the main objective of research, Kothari (2005) states that research should help the reader to discover the truth that is hidden through the application of scientific procedures.
Methodology produces the outcomes of any studies and it is important to choose appropriate way to conduct the research methods in effective way in order to meet researcher's aims and objectives of the research.
Research methodology followed in this dissertation presents topics on different forms of research which are used in order to find an appropriate approach and method in this study. The researcher outlined aims and objectives of thesis in Chapter 1 therefore the purpose of this chapter is to :
- introduce research philosophy in relation to adopted approach in this study
- discuss research strategy expounded in current study, including the research methodology conducted
- present the instruments of research method which were developed and utilized in the achievement of researcher' goals
- explain why the specific methods were adopted and constrains in relation with data collection considering the limitation to the presented research
Further, the chapter discusses the issues followed as: research philosophy, research approaches, research design, data collection method, data analysis, reliability and limitation of the research.
4.2 Research philosophy
According to Proctor ( 2005 ) , the academic research should be developed in a philosophical way. Differently speaking, the research should be followed with method of study elaborated to better explain and facilitate the analysis of subject. Looking at this context, the philosophical approach gives framework of the research according to its configuration, necessary evidence, gathering the data and the way of its interpretation to provide the right answers to the research questions.
The research starts with its first step which is definition of the philosophical method of research that ought to be examine. There are several different approaches of research philosophy, such as the positivism, phenomenology and realism. ( Saunders et. al., 2003 ). Each approach sets hypothesis and various methodological implication according with its position and the brief description of the characteristics of each research philosophy will be interpreted below.
According to Currie ( 2003), the positivist approach means development of general rules and principles using the different systematic techniques of scientific method. The positivist approach begins with dilemma, idea or observation as it is the first step associated with this philosophy. Following this way of approach, the researcher analyzes the fact and objectives of the study in order to create the logic way of thinking to explain subject of the study. In the view of Newman (2005 ) this approach is based on quantitative investigation.
Prediction of prospective behavior is used in the positivist approach by generating general laws from the standpoint of objective truth.( Fisher, 2004). Based on researcher's belief on accurate and value free data , this approach determines human beings and their action to be studied as objectively as the part of natural world.
Phenomenology is also called " non-positivist ", " intrepretivist " , "naturalistic" approach. The followers of this approach contend the observation of phenomenon should be key of obtaining the comprehensive explanation and description of the problem. Through the subjective interpretation reality can be fully analyzed .Approach present that the objective truth is less important because the reality is socially created, hence it holds subjective truth. The key element of the non positivist philosophy is the study of the natural environment followed with affects on those phenomena. Scientists believe the reality is relative part to various variable such as situation, time , location, culture, value of society, etc. Thus researchers of this approach go further to realize how things occur in reality and how people react on its occurrence rather than to generalize things based on standards laws. ( Fisher, 2004)
Realism research philosophy lies on philosophical views of positivism and it is based on the statement that the objective reality exists and it is independent part of human beings' beliefs and behavior. Realism also states that humans are not considered as objects in the studies of natural science, but social influence is taken into account. Further, realism gives mains importance to those social influences in order to better understand the way of people's behavior and thinking and their awareness of these social forces. ( Saundres et al., 2003 )
Based on the three different type of research philosophies, this research followed phenomenology approach with the objectives of research project . Developed on this approach, researcher was able to define the nature of the problem being investigated and to get the better understanding of the environment within the problem occurred. Usage of phenomenology approach provided a comprehensive description of the main aim of the research referring to the importance of risk management in today's business world.
4.3 Research Approach
According to Saunders et al. there are two main research approach conducted by business research known as deductive and inductive scientific methods of reasoning.
The deductive approach means testing theories on effective way where researcher is able to develop a theory or hypothesis creating strategy for testing the theory. In the view of Saunders (2005) it is appropriate scientific research method for the organization so called "top down " method. There are three steps when conducting research based on deductive forms of reasoning: Firstly, researcher states the hypothesis examined with theory or research literature. Secondly, collecting data in order to researcher test the hypothesis. The final step leads to building the right decision when researcher is accepting or rejecting the hypothesis based on conclusion.
In contrast, the inductive method , well known as "bottom up" scientific method suitable when researcher's aim is to generate theories and hypothesis in order to understand why something happens in reality. Inductive approach of reasoning is usually basic way for building the theories, when researcher by collecting data scientific way to develop theory as a result of data analysis.
The inductive method involves three steps in its process referring to researcher's ability to observe the environment , find a pattern for observed element and provide generalization about final result of analysis.
In reality the two approaches are not mutually exposed, but have joint participation in business studies (Seddighi, 2000 ). Nevertheless, the important fact about those two scientific methods lies on statement that its presence in research depends on research question and research objectives.
The inductive and deductive methods are demonstrated in figure below :
Therefore, the deductive approach was adopted to create a path for this particular research. This method of research was used to test theory based on hypothesis moving from specific to general. Usage of this approach enabled researcher to contribute to the successful achievement of the objectives of this project. Implementing this method researcher was able to understand the company and its risk management techniques in the specific environment related to the topic and evaluate the strategies used by the Societe Generale Bank to maintain the same.
4.4 Research Design
The research design is used to address the research questions which were taken into consideration in this study. The research design appears from questions directly determining the main objectives being examined in this thesis. These questions are results from the gaps between theory based on literature review presented in Chapter 2 and analyzing and findings of primary data based in the following Chapter 5.
Yin (2003) states that research design is dependent element for research project helping the researcher to decide what questions to study, which information are relevant to the current case study, how to collect data and to do analysis of presented findings. In the view of Saunders et al. ( 2003 ), there are three various types of research design followed as :
(1) Exploratory, (2) Descriptive and (3) Explanatory. The description of each will be summarized below.
Exploratory research is constructed to answer "what" questions, according to Yin (2003), and in many cases includes new studies which can be result of the appearance of new phenomena or insufficient knowledge on the subject of any study. This approach is also recommended to approve researchers' objectives by gaining new insights about specific issue which fit well and present a good match to this research. Saunders et. al (2003) states usage of this approach especially for understanding the problem expressing the main steps to conduct an exploratory research : searching and studying the literature and talking to experts in the subject through interviews. This concept is characterized as flexible and adaptable to daily changes as result of new information upcoming or new hypothesis appearing.
Concept of this research implies design addressed to reveal validate profile of persons, events or situations. Descriptive concept tends to answer on questions such as "who", "where" , "how many"; "how much". However, "what" question can be included in situation if the research wants to have u clue about the details of some specific topic or issue. Descriptive research is also well known as archival research because of the use of arcival records. ( Yin, 2003 ). The concept is useful and crucial when the researcher achievement focuses on details and descriptrion of ohenomena or when it should show prediction about specific findings. Unlike exploratory approach which is based on qualitative research, descriptive concept implies qualitative way of analysis using archival records, questionnaire, secondary data, etc.(Saunders et. al., 2003 ).
Explanatory research is known as casual research and is conducted for answering the "how" and "why" questions. A casual study is focused on finding casual relationships between variables. This concept of approach use qualitative way of research such as case studies, histories, experiments aiming to describe relationships expressing the cause and effect of particular incident. Explanatory research design allows using qualitative approach to answer on question "how" and "why" depends on sources of relationship between cause and effect. In that way, operational links required implication of secondary data, statistics. ( Yin, 2003; Saunders et. al. 2003).
According to Saunders et. al. (2003), exploratory research design is the most suitable and useful for new studies giving the significant contribution for understanding of the findings of the main subject. Therefore , this research is of an exploratory nature and the exploratory research was developed in order to define the nature of risk management and explain and clarify the understanding of usage and effectiveness of risk management in Societe Generale Bank. The researcher of the presented issue wanted to compare and contrast the findings with the theory expressed in literature review and was able to give the suggestion and recommendation to the company or other companies in the same work filed and future prospective through exploratory research design which is briefly presented in Chapter 6.
4.5 Data collection Method
One of the most important element in research project is data collection method. This method means good preparation and organization of collecting data in order to researcher not have a problem to face too much information collected, which can become a major obstacle rather than help in the project researched. Very often, there is much information available that can be a barrier to sort and evaluate real and important information and to assess their usefulness It is necessary to understand different approaches and methods for collecting data and that have great importance in preparing research and organizing data collection in a systematic way. ( Lancaster, 2005 )
According to Saunders et. al. ( 2003 ), there are various forms of information which can be distinguished in two main group as secondary data and primary data.
Lancaster states (2005) that the secondary data are " second hand " data which already are presented and collected by other researchers for the purpose of previous researches and giving hypothesis on other issues. It summarized raw data and published data including internal records and external records within the organization. Those secondary data can provide wide range of sales and marketing data, production data, financial data, personnel, transcripts of speeches, administrative and public record data followed by external record such as newspapers articles, journals, internet, official statistics, etc.
Secondary data have qualitative and quantitative nature and its utilization is visible in both descriptive and explanatory research.
According to Saunders et. al. ( 2003 ), the advantages of secondary data leads to saving both money and time, having fewer resource requirements for specific issue, creating easier way for longitudinal studies, providing comparative and contextual data and may result in unforeseen discoveries of particular subject. On the other hand , disadvantages can be expressed through some of negative aspects of its collection. Sometimes its purpose does not match the goal of researcher and its access may be costly for commercial reasons. Thus, those data can lead to unsuitable definition for the required subject affecting the quality of data presented.
Primary data refers to collection of data by researchers using the various methods and techniques such as interviews, questionnaires, observations, experiments in order to gather the most valuable data necessary for researchers' project . The process of collecting primary data requires more time, effort and resources comparing with secondary data providing more relevant answers on the research questions.
Looking at collecting data on primary way , there is distinguish between forms of data collected which can be categorized in two main groups: quantitative and qualitative data. (Saunders et. al. 2003)
Quantitative data refers to number -organized data and can be expressed numerically giving the framework with numerical value. This approach is recommended during latter phases of research projects. Approach deals with questions such as "how many", "how large", "what rate something. Using quantitative data tends to be more efficient, to test hypotheses, but may result in fewer contextual detail about particular topic. Quantitative process of collecting data is more objective and scientific process than qualitative process. (Lancaster, 2005)
In contrast, the aim of qualitative data is to provide a complete, detailed description and this process is recommended during earlier phases of research work. Qualitative approach is more subjective and gathered information can not be numerically analyzed. Therefore, those data has usage and utilization in investigation about people's opinion, attitude, fears and hopes which can not be part of quantitative analysis. Qualitative data results in more 'rich' relevance in term of time consuming, and less probability to be generalized.
In this project, data were collecting based on qualitative interviews with the managers of Societe Generale Bank in Serbia , because the researcher wanted to deeply explore the effectiveness of risk management in banking sector and its implementation in today's banking environment in branch of Societe Generale Group in Serbia from the point of view of respectable managers in the Bank. Through interview with the managers who work for the company, the researcher achieved goals which has already mentioned in Chapter 1 providing aims and objectives of the current research. Although, observation would be dependent part of this research and would help to discover how risk management department works by its employees, time constraint was the main reason why research couldn't spent more time in Serbia, observing the bank risk activities, because the company of case study is located in Serbia. Therefore, researcher used well organized interviews as the most appropriate way to collect valuable data according to the already mentioned limited circumstances.
According to Lancaster (2005), interviews are defined as a main category of data collection techniques and appropriate way for collecting data through questioning effectively. This technique is crucial for getting the background of participant's experiences. This method is adopted when researcher tends to fully understand the impressions, attitudes, feelings, motivations or experiences of someone to gain more knowledge through their answers on questionnaires. There are several types of interview used in research project to collect data divided in three categories: structured interviews, semi-structured interviews and unstructured interviews.
- Structured interviews means using specific questionnaires and this research method is usually used for quantitative surveys. The structured interviews involve the interviewer inability to change the structure of question by adding or removing some of its sequence. Conducted in formal way, respondents' responses are recorded on a questionnaire standardized form during the interview process. As a result, the analysis of the structured interviews have quantitative nature.
- Semi-structured interviews is research instrument used to provide greater volume for discussion and knowledge about the problem, opinion and respondet's view of particular subject. This approach is flexible in terms of changing some questions during the interviews process giving the researcher freedom to ask slightly similar question in order to cover list of already prepared themes. The questions can vary from one interview to another following the path of discussion with respondent. Thus the collected data can summarize both qualitative and quantitative information and have impact in exploratory study.
Unstructured interviews are also called "in-depth" interviews. The unstructured interviews are conducted in informal manner as preliminary step in research in order to interviewer generates hypothesis about the nature of subject being investigated. Adopting this research instrument interviewer is aware of ability to gather the data necessary for research topic, matters and responses in some depth. Those interviews are guided by predefined list of thesis and they are not controlled by specific questions. The main purpose of choosing in-depth interviews lies in interviewer's need to find out what people think and way how they react to issues. The respondent is encouraged to reveal and to talk about everything that he/she thinks on issues of interest to the researcher. The interviewer is taking note (or tape-recording) for all highlights that would greatly contribute to the research
Following the phenomenology approach and exploratory research design, the researcher decided to use semi-structured interviews with managers of Societe Generale Bank in Serbia as a method to collect qualitative data about risk management in Societe Generale Bank and its implication in bank activities as well as the result it is achieved. This method is used by research in order to reader meet expansive response from the interviewees, but at the same time to provide comparation between theory and practice considering risk management in banking sector as issues. Also this method is less formal choice and better way to catch the point of view of the managers by getting inside information in relation to the research topic.
In addition, secondary data such as company records about financial report of previous year, press release with relevance to the topic was collected for consideration as well. Policies of the company for the internal and external control of risk were analyzed keeping the management of Societe Generale as the focus of research.
4.6 Interview guide
As it was mentioned in the previous paragraph, the research was conducted by interviewing managers of Societe Generale Bank in Serbia in order to analyze the way they implemented risk management techniques within bank activities in credit department as well as to explore the achievement gained from applying this. Therefore, this section will provide the framework used by researcher to design the interview.
According to Fisher (2004), the first step in designing the interview is to identify the main point of question and priorities them. This way of conducting the interview helps researcher to organize the question regarding to its importance to the research topic. It is important to make hierarchy from more important to less important questions which can be dismissed in terms of having insufficient time.
Therefore, the researcher presented question summarized them in several topics as follows:
- Brief background of Bank
- Risk management concept
- The main purpose of undertaking an analysis of risk
- Techniques and methods of Societe Generale Bank in Serbia adopted in risk credit mitigation
- Effectiveness of credit risk management in Societe Generale Bank in today's economic climate
- Measurement credit risk
- Implementation and importance of Basel II accord in banking sector
To accomplish the objectives, researcher realized the interviews with the managers on the topic given above. The researcher collected information regarding to risk management in credit department and the effectiveness of undertaking risk management analysis in the Bank.
The analysis of the questions was realized from a set of interviews with the managers of the Societe Generale Bank and was conducted through the series of meeting. In each meeting a different subject concerning the credit risk management was verified. In total , five different meetings were completed discussing the risk management issue on the highlighted topic given in previous sequence.
Having collected data from primary and secondary sources, the next stage was analysis of the records and the description of findings which will be presented in the following Chapter 5.
4.7 Data analysis
The data collected in this research implied using the qualitative data and the researcher adopted three steps to analyze it. In the view of Saunders et. al. 2003, it is crucial to conduct data analysis in effective way in order to get response on the research question and achieve research objectives and aims.
First step included analyzing the data , which was recorder by tape or taking a note during the interview process, by prioritizing the most valuable data for the discussed issues. After that, the researcher was able to unitize the data by implementing the quotation from the respondent which supported the key elements of the research topic. Final step the researcher used to analyze data though tables for the each categorized data giving the better understanding and impressionistic view of meaning the answers.
Effective data analysis will enable reader to understand the way of using risk management techniques and tools in credit department of Societe Generale Bank in the main representative office in Serbia providing the logical conclusion on the research topic. Therefore, data analysis presented in the following Chapter will approach reader to critical, reflective and meaningful analysis between data and comprehensive research in order to be achieved the aims and objectives of this research.
4.8 Reliability and validity
Reliability and validity are very important elements when researcher analyzes the data conducted through qualitative research.
Consistency of the result is essential component when conducting the research topic. Marshall and Rossman (1999) quoted that qualitative data collected to accomplish aims and objectives of study are not open for any replication ( Saunders et al. 2003 ). Hence, qualitative researcher based on unstructured forms should reveal reality of the issue being investigated. Realibility and validity as part of data collecting are essential for analysis and creating key findings of study and reader will be able to meet trustworthy results of presented subject
In this study, the researcher used the method of qualitative research in order to examine credit risk management and its applicability in today's economic climate. Leading its research to qualitative way, researcher was able to make comparison and contrast between literature and practice and give recommendation and suggestion for the subject examined. Thus , this study based on reliability and validity of qualitative data create a clear path for achieving researcher's aims and objectives in very dynamic and complex way