Risk Committee's Influence on Enterprise Risk Management

Risk is real and it is particularly very serious in the case of managing banks in Nigeria because of several reasons; including the fact that it is an emerging economy. It can affect a bank’s bottom-line to say the least and even its survival. It is in view of this that this article links risk committee effectiveness with risk management by banks in Nigeria. Using 130 observations (13 banks, 10 years) for 2012-2021, we employ a correlational research design to develop a panel model linking risk committee characteristics with risk management. We use descriptive statistics, correlation matrix and regression to analyse the data after accounting for outliers, normality and homoscedasticity of residual, multicollinearity, model specification error, and panel effects tests. The findings show that risk committee presence and size have negative and significant effect on risk management. It also shows that risk committee independence, gender diversity, and meetings show positive and significant effect on risk management. On these bases, we conclude that risk committee presence and size negative determinants while risk committee independence, gender diversity and meetings are positive determinants of risk management. We suggest that risk committee should be merged with the audit committee of the board across banks. We also suggest that risk committee size should be reduced in order to cut costs. Further, we recommend that risk committee independence should be enhanced by appointing more non-executive directors to the committee. We also recommend that more women directors should be appointed into the risk committee of banks. Finally, we recommend that there should be more meetings for members of risk committee. Regulators and stakeholders stand to benefit from the study as more empirical evidence on the role of board risk committee is provided. The findings are limited to stakeholders in banks since there are variations in different sectors. The study is also limited due to the period covered and therefore, the validity of its findings is restricted to the years covered. Also, the choice of methods used may be subject of debate since different methods produce different results. Finally, broader set of variables may be used in future research effort linking risk committee with risk management.