EFFECTS OF INTERNAL CONTROL SYSTEM ON RISK MANAGEMENT IN FINANCIAL SERVICE FIRMS IN NIGERIA. (A STUDY OF DEPOSIT MONEY BANKS AND LIFE INSURANCE COMPANIES IN OSUN STATE)

This study examined the effects of internal control systems on risk management in financial service firms in Nigeria. Utilizing The Committee of Sponsoring Organizations of the Treadway Commission (COSO 2021) internal control framework, the study focused on four core components: control environment, risk assessment, control activities, and information and communication. The research employed a descriptive survey design, with data collected from 150 staff across five deposit money banks and five life insurance companies in Osun State. Respondents included internal auditors, compliance officers, risk managers, and finance personnel. The data were analyzed using descriptive statistics, Pearson correlation, and multiple regression analysis. The results showed that all four components of internal control systems have a statistically significant and positive impact on risk management. Specifically, risk assessment (β = 0.272, p < 0.001) had the strongest effect, followed by control environment (β = 0.230, p < 0.001), control activities (β = 0.215, p = 0.001), and information and communication (β = 0.197, p = 0.002). Consequently, all null hypotheses were rejected. The study concluded that internal control systems play a critical role in enhancing risk identification, mitigation, and overall management effectiveness in Nigeria’s financial sector. It recommended that firms strengthen ethical leadership, formalize risk assessment frameworks, and improve communication systems to manage both traditional and emerging risks.