Abstract
This study examines the influence of risk governance on financial performance of 50 quoted firms in the Nigerian financial sector for the period of five years (2013–2017). Panel data was used to examine how the risk governance variables (Enterprise Risk Management_index, Chief Risk Officer_presence, Board Risk Committee_size, Board Risk Committee_activism, and Board Risk Committee_independence) affects financial performance (Return on Asset). The study reveals empirically that most of the risk governance variables (ERM_index, CRO_presence, BRC_activism, and BRC_independence) have a significant and positive impact on the performance of the firm with the exception of BRC_size which shows a negative association with the financial performance of the studied firms. The study empirically reveals that strong Chief Risk Officer (CRO) presence, effective board risk committee, and inclusion of independent directors in the risk committee will go far in serving as factors that would improve the performance of firms in today’s financial environment. This study made a lot of core findings that contribute to the emerging literatures on risk governance and risk management research.
Highlights
The subject of risk governance has received global attention in recent times, due to the financial crisis that engulfed most financial institutions in 2008
This study focused on examining the impact of risk governance on financial performance of firms operating in financial sector in Nigeria
The observation from our findings reveals that almost all the explanatory variables in relations with financial performance shows a positive and significant relationship, except the BRC_size that revealed an insignificant relationship with financial performance
Summary
The subject of risk governance has received global attention in recent times, due to the financial crisis that engulfed most financial institutions in 2008. It is believed that the complexity of financial dealing, increase in global cross borders transaction, business uncertainty and volatility in financial markets have brought to fore the recognition and practice of risk governance. In response to dramatic failures of corporate organisations recently, there has been a significant need to ensure that the practice of risk governance is strengthened. The framework of risk governance requires identification and assessment of all the aggregate risks affecting the financial performance, by the management, and the need to apply a holistic strategy in risks management process. Meulboek (2002) described risk governance as a concerted effort put in place by the management with the aim of identifying and assessessing the aggregate risks that affect the performance of a firm so as to ensure a comprehensive management and reduction of those risks
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