Author(s): Flicia Rimin, Imbarine Bujang, Alice Wong Su Chu, Jamaliah Said
Risk management is a prevalent concept that underlines the value of providing good quality control and risk management functions to effectively monitor the corporate risk management framework. Previously, the MCCG 2007 mandated listed companies to include a risk management team in the internal audit committee to assess the efficacy of the organization’s risk management, internal control, and governance process. However, due to recent corporate failures and ineffectiveness of audit committee to monitor firm performance, there is a growing need for a separate RMC. Thus, the purpose of the study is therefore to analyse the risk management committee’s structure and effectiveness distinguishing two (2) models; a separate and combined RMC on the firm financial performances of listed companies in Malaysia. The research is based on a Static Panel data technique involving regression based on FEM, REM and Pooled Ordinary Least Square (OLS). The findings indicate that a company that set up an RMC consisting of a majority of independent non-executive directors, specifically a separate RMC, would significantly improve the firm's performance. The latter results support Agency Theory which suggests that independent non-executive directors enhanced the transparency of corporate boards as they improved the firm’s compliance with the disclosure requirements.