The significance of management accounting in ensuring robust risk governance of Maltese credit institutions

Abstract

This dissertation investigates the role of management accounting in enhancing risk governance within Maltese credit institutions, drawing on sector-specific insights against a backdrop of evolving regulatory demands. Purpose: The management accounting function serves as the principal source of internal financial information, providing a critical foundation for both risk management activities and strategic decision-making. Building on this premise, the study seeks to assess how management accounting contributes to strengthening and advancing risk governance frameworks within Maltese credit institutions. Design: This qualitative study met its objectives by conducting semi-structured interviews with professionals in the banking sector. Findings: This study highlighted the pivotal role of management accounting data within risk governance structures, emphasising the extensive and critical collaboration between the management accounting and risk management units, consequently blurring the distinct responsibilities traditionally outlined in the Three Lines Model (TLM), and contributing to the emergence of a context-specific, hybrid accountant. Enterprise Risk Management (ERM) emerged as the dominant framework, widely embraced for fostering a strong organisational culture of risk awareness and reinforcing interdepartmental cooperation. Nevertheless, the study identified several challenges, such as limited mutual understanding between departments, ambiguity around individual risk-related duties, inadequate data detail, swiftly changing regulatory landscapes, and growing reliance on sophisticated technological tools to remain competitive and compliant within the sector. Conclusions: While the findings affirm the importance of management accounting in supporting risk practices and the widespread integration of ERM, there is still room for improvement. Suggested improvements involve promoting structured collaboration, broadening the scope of management accounting data, enhancing understanding, and embracing technological advancements. Value: This study aims to illuminate the role of management accounting data in risk governance, addressing a gap in industry-specific literature, whilst highlighting common practical challenges and offering targeted solutions.