Year: 2024 | Month: December | Volume: 11 | Issue: 12 | Pages: 694-701
DOI: https://doi.org/10.52403/ijrr.20241276
The Impact of Risk Control Units on Corporate Performance in Indonesia
Hizkia L Manurung1, Willem A. Makaliwe2
1,2Master of Economic Planning and Development Policy Program University of Indonesia, Jakarta, Indonesia.
Corresponding Author: Hizkia L Manurung
ABSTRACT
This study comprehensively examines the influence of Risk Management Committees (RMCs) on corporate financial performance, specifically measured by Return on Assets (ROA), through three distinct linear regression models. Model 1 evaluates the direct presence of RMCs, Model 2 analyzes the interaction between RMCs and governance characteristics, and Model 3 examines the classification of RMCs based on their risk management functions, whether handled by standalone committees or integrated with other governance bodies. The findings reveal that the existence of RMCs has a significant negative effect on ROA in Models 1 and 2, while Model 3 shows no significant effect. Control variables, such as liquidity (CurrRatio), asset turnover efficiency (AsTurn), and market capitalization (Mcap), demonstrate consistent positive effects on ROA across all models. These results underline the importance of optimizing RMCs through enhanced operational effectiveness and strategic alignment with organizational objectives. The study acknowledges limitations, including its focus on financial outcomes and the exclusion of non-financial dimensions, such as stakeholder satisfaction or corporate reputation. Future research is encouraged to investigate these broader aspects for a more holistic understanding of RMC contributions.
Keywords: Risk Management Committees, Corporate Governance, Return on Assets, Financial Performance, Indonesia, Risk Oversight, Governance Effectiveness.
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