Risk Management Practices and Performance of Non- Financial Firms in Nigeria

Adesanmi Timothy ADEGBAYIBI, Michael O. Adelowotan and Mohammed Kayode AJAPE

Abstract:

Recent business failures in Nigerian non-financial firms have been ascribed to the negative consequences of operational and strategic risks. Therefore, this study investigated the impact of risk management committees on the financial performance of quoted non-financial firms in Nigeria from 2012 to 2022.

66 non-financial companies listed on the Nigerian Stock Exchange of December 31, 2022 formed the population of the study. A simple random selection approach was used to select a sample size of forty (40) non-financial firms, ensuring that all sectors of the organizations had an equal chance of participating in the study. Data were obtained from sampled firms audited financial statements and the Nigeria Exchange Group Factbooks. Data were analyzed using both descriptive statistics and a panel regression analysis.

The study found that the size of the risk management committee has a negative and significant impact on the financial performance of non-financial firms. Furthermore, firm age has a significant positive impact on the financial performance of non-financial firms. It was also revealed that the size of the board's risk management committee has a significant impact on financial performance. Based on these results, managers of listed non-financial firms should consider expanding their risk management committees to improve financial performance; increasing both the number of committee members and the minimum committee size could improve decision-making and oversight. Also, holding more frequent committee meetings could help better anticipate and manage emerging risks in today’s dynamic business climate.

The study adds to the ongoing debate about risk management techniques and financial performance by delving into the composition of board risk management committees in publicly listed firms and their role in improving overall financial performance. It assists corporate management in defining the ideal size of the risk management committee for successful outcomes and helps shareholders understand the amount of committee independence required to significantly enhance financial performance.