The Impact of Governance on Improving the Effectiveness of Risk Management: The Moderating Role of Internal Audit at Saudi Commercial Banks

Abstract

This study aimed to identify the impact of governance in its dimensions (work systems, participation, transparency) on enhancing the effectiveness of risk management in its dimensions (strategic risks, financial risks, operational risks) and the moderating role of internal audit in Saudi commercial banks. To achieve the study’s objectives, the descriptive-analytical approach was used, as it aligns with the study's goals. A questionnaire was constructed based on the theoretical literature and previous studies on the subject. The study population consisted of Saudi commercial banks, where a comprehensive survey method was employed. The study sample included senior, middle, and lower management. A total of 344 questionnaires were distributed, of which 321 valid responses were retrieved for analysis.

The study's results indicated that governance in Saudi commercial banks is at a high level, while the effectiveness of risk management is at a moderate level. The variable of internal audit moderates the impact of governance on risk management by 16.5% of the total variance. Furthermore, the results showed a statistically significant effect of governance in its dimensions (work systems, participation, transparency) on the effectiveness of risk management in its dimensions (strategic risks, financial risks, operational risks) in Saudi commercial banks.

Based on these results, the study made several recommendations, the most important of which is to enhance participation in governance, as it promotes accountability within banks, ensures close monitoring of the performance of management and the board of directors, and limits risks and inappropriate behaviors. This also reinforces adherence to ethical standards and laws. The study further recommends applying the model to other sectors and using other variables to better understand the relationship between the independent and dependent variables, as well as exploring additional variables other than governance that may impact risk management.