Risk Management as a Conduit of Effective Corporate Governance and Financial Performance of Small and Medium Scale Enterprises

Abstract

Previous attempts to measure the quality of corporate governance tend to focus on inputs of governance such as the separation of the CEO and the chairman’s roles and the composition of boards, largely based on the agency theory. The purpose of this paper is to examine the extent to which risk management can be incorporated into the corporate governance framework on the backdrop of stewardship theory. After reviewing some of the key issues from literature, the paper demonstrates how relevant risk management practices are to the governance of the SME sector. It also made clear that both corporate governance and risk management have a positive relationship with financial performance. In the end, it advocates for the need for both practitioners and researchers to pay attention to issues of risk management when analyzing the extent to which corporate governance principles are being adhered to by business organizations