The Role Of Audit Committees In Strengthening Governance And Risk Management In Banks: Evidence From Nepal

Abstract

Corporate governance and risk management are both critical for the effectiveness and sustainability of banking and financial institutions. Audit Committees play a vital role in risk oversight, ensuring financial integrity and contributing to the overall stability of banking institutions. They are responsible for overseeing financial reporting, ensuring regulatory compliance, and monitoring risk management mechanisms. This study investigates the impact of Audit Committees on governance and risk management practices within Nepalese banks.

The research utilizes secondary data from annual reports and directives issued by Nepal Rastra Bank. Through the application of Confirmatory Factor Analysis and multiple regression models, the study reveals a positive relationship between the role of the Audit Committee and key risk management factors. A proactive approach to risk assessment by the committee emerges as a significant contributor to effective risk governance. The study also identifies areas for policy improvement, emphasizing the need for stronger integration of audit oversight into risk-related decision-making processes.

This study adds to the limited empirical literature on corporate governance in the South Asian banking system. Strengthening the independence, accountability, and technical capability of audit committees is necessary to improve institutional resilience and restore stakeholder confidence in the banking sphere.