Risk management, internal audit function, and corporate performance

The purpose of this study is to determine the relationship between risk management practices and the internal audit function with the performance of companies. It is interesting to examine how competitive advantage can be achieved when the company is able to face and adapt to a complex business environment via robust risk management practices and an internal audit function. This study uses archival analysis on the annual report of the top 500 publicly listed companies in Bursa Malaysia, which represent approximately 65 percent of the total market capitalization. Both independent variables, namely risk management and internal audit function, are measured based on corporate governance requirements which are issued by the Malaysian authorities, and best practices taken from various international corporate governance recommendations. The results from the multiple regression analysis provides evidence that risk management was significantly positively related with all the performance measurements, supported the earlier findings by Krause and Thse (2016) and Nahar et al. (2016), while there is a mixed findings between the internal audit function and corporate performance. This study is original as it not only examines risk management practices and internal audit function from a local corporate governance perspective but also takes into consideration various recommendations from international best practices.