The links between risk management and internal audit units in Maltese-listed companies

Abstract

PURPOSE: The main purpose of this study was to research the relationship and objectives between the risk management and internal audit functions in Maltese-listed companies. It sought to observe the extent to which both functions refer to each other’s work and also examine any challenges which may arise to improve the relationship of both units. DESIGN: Throughout this research, eight semi-structured interviews were conducted with internal auditors or risk managers across different Maltese listed-companies. Moreover, another four interviews with auditing firms were carried out, leading to a total of twelve semi-structured interviews. FINDINGS: The study indicates the importance of both units to cooperate and communicate effectively by having regular meetings and joint training sessions. Also, suggests that having a good organisational structure can outline roles and responsibilities and facilitate engagements between both functions. Continuous learning and technological developments offer significant benefits to adapt to business dynamics to ensure good corporate governance. Lastly, the study indicated certain challenges faced by both risk management and internal audit teams, along with strategies to address them effectively. CONCLUSION: The study concludes that Maltese-listed companies are aware of the importance for internal auditing and risk management processes. Both units evolved throughout the years to adapt to changes in the business environment despite facing certain challenges. More effort and support from top management and audit committee must be made available to increase an organisation’s risk awareness and improve corporate governance. VALUE: This research study has highlighted the importance of encouraging and managing a healthy relationship between both functions. Both functions should strive to remove any setbacks and challenges between them to add value for an organisation. Also, this study is significant for regulators and policymakers and Maltese-listed companies to improve their organisational structure and corporate governance.