The impact of risk management committee on firm risk, with risk management practices as a mediator

<p><span>This study examines the influence of a dedicated Risk Management Committee (RMC) on firm risk, assessing how risk management practices mediate this relationship. The primary purpose is to determine whether an RMC directly reduces firm risk or if the committee's effectiveness is largely realized through implementing comprehensive risk management practices. Data were collected from publicly traded companies spanning ten years from 2014 to 2023, focusing on firms with established RMCs across various industries. The methodology includes panel data analysis using multiple regression analysis to test direct and mediated effects, offering robust insights into the relationship between variables. The findings reveal that while the presence of an RMC is associated with lower firm risk, the full risk mitigation effect is achieved only when risk management practices—such as risk assessment, monitoring, and compliance checks—are actively implemented. The mediation analysis confirms that risk management practices significantly enhance the RMC’s impact, providing a pathway through which the committee can influence firm stability more effectively. In conclusion, the study highlights the essential role of active risk management practices in reducing firm risk, underscoring that the RMC's presence alone does not suffice. The study recommends that firms establish an RMC and prioritize continuous improvements in their risk management practices to achieve optimal risk mitigation. This research contributes original insights by isolating the mediating role of risk management practices, adding depth to the literature on corporate governance and risk control mechanisms.</span></p>