RISK MANAGEMENT COMMITTEE CHARACTERISTICS AND FINANCIAL PERFORMANCE OF FIRMS: A SYNTHETIC REVIEW

Abstract

Nowadays, globalization is now considered to be associated with an increasing complication of risks arising in response to global financial crises and international regulatory requirements, thereby making risk management committee (RMC) an indispensably essential element of corporate governance tool for controlling company’s risk and evaluating firm’s financial performance. The importance of risk management is now gaining momentum due to the uncertainty of world economic growth that gives a major impact on business performance worldwide. Hence, the indispensable role that RMC plays in analysing financial performance of firms in recent years has caught the attention of researchers to delve into conducting studies in this area. The study is also motivated due to the reported inconsistent results arising from several factors. The main objective of this study is to synthetically review related extant literatures on RMC characteristics (such as Independence, size and separate) and financial performance of firms. The method employed in this study is more of conceptual study with keen interest on recent related scholarly articles from reputable journals. Thus, to accomplish the objective of the study the researcher used some combination of key words like “risk management committee and financial performance” to search for relevant extant related scholarly articles, conference papers and dissertations that are germane to the study from several high-ranking online databases. The study uncovered that several factors are responsible for the conflicting mixed results. These factors include different domain, methodology and/or economic development, the lack of technical knowledge and experience, differences in the measurements used in the studies and the timeframe they choose. Additionally, the current study also attributed the direction of the outcome of the studies reviewed to be associated with the impact of Covid 19 on firm performance. Based on the results of the study, it can be concluded that establishing and having the required number of RMC independence and RMC size as stipulated and recommended by corporate governance extant law can improve firm’s financial performance.