Abstract
This study investigated the impact of internal audit and top management disposition on risk management in the Nigerian financial services sector. This study was cross-sectional and correlational, and it used firm-level data that were collected by means of a questionnaire survey from a sample of 62 financial services firms in Nigeria. Our findings suggest that internal audit and top management disposition are both significant predictors of risk management. However, the predictive potential of top management disposition towards risk management reduces when effective internal audit is present. These results support the idea that in terms of agency theory, top management should oversee and review the organization’s risks as a way of spearheading effective risk management. Similarly, it was recommended that internal auditors should sufficiently and appropriately review and coordinate risk management efforts in organizations, since high-quality internal audits lead to effective risk management. Top managers of financial services firms should encourage periodic reviews of the appropriateness and effectiveness of risk management systems and controls. At the same time, regulators should ensure that top managers of financial services firms have adequate risk management expertise, with no conflict of interest and apply mechanisms that detect significant risks in time.
Key words: financial services sector, top management disposition, internal audit, risk management
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