Role Of Internal Control In Risk Management

1.0 INTRODUCTION
Internal control has played a major role in risk management especially in the banking industry in Nigeria.
According to British Auditing Guideline, which defined internal control as the whole system of control financial and otherwise, established by the management in order to carry out the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of records. Where as Hornaren and foster (1990:910) defined internal control as the set of accounting and administrative controls and practice that helps to ensure that approved and appropriate decisions are made in an organization.
Internal control as the organization of accounting duties is such a way as to maximize the chance of accurate accounting and minimize the chance of risk or the occurrence or impact of such losses if they occur.
The management has the duties in risk identification, evaluation, avoidance, transfer, retention, recruiting and financing. However, Chris Aloma Osondu (2008) emphasized on risk management whereby business can hardly operate without an element of risk and defined Risk management as a ‘scientific approach to dealing with pure risk by anticipating possible accidental losses and feigning and implementing procedures that minimizes the occurrence or the impact of such losses if they occur.
According to Anyanwu F.A. (2007) Risk can be designed as the general uncertainty, doubt, chance of loss or insurance the insured object.
An organization like Zenith Bank Plc which is our case study is such that if internal control system is not efficient there is every tendency that risks cannot be managed properly in such an organization.

1.1 STATEMENT OF PROBLEM
When risks occur the concern is always the economic loss associated with the loss. Hence it is regarded as an involuntary parting of value. The economic loss may take many forms such as a loss of property by physical perils as fire or thief. It may also take the form of premature death of the key man of a business enterprise or a family breadwinner. It may arise out of the ineffectiveness in the management of an enterprise, or even as a result of law suit to recover damages for some negligent act. Therefore, the problems intended to study are:
1. How management handles their risk;
2. How efficient is the internal control of the organization;
3. If the internal control system in that organization helps at all in management;
4. If the organization is insured.

1.2 NEED FOR THE STUDY
There have been a lot of study and sharp practices among directors, employees, accountants and other high ranking personal of the business organization, which engender poor performance output.
Furthermore, by virtue of the fact that Zenith Bank Plc has its stock in trade as money (cash), which makes it sensitive and vulnerable to risk, the need for the implementation of stringent control measures is necessary:
a. The study is aimed at helping to develop risk management technique within the organization and ensure the formulation of a corporate policy on risk management.
b. To train, advise and assist management in the effective management of risk.
c. To implement the various programmes, as well as performance.
d. To identify the various exposures to loss as well as the probability of loss from various losses.
e. To ascertain the most economical method of handling risk.

1.3 OBJECTIVE OF THE STUDY
The main objectives for this research work can be stated as follows:
i. The ability to manage the past and present loss resources of the business in order to preserve the effective operations of the business after any loss.
ii. The control of the resources needed after the loss by using systematic programme of loss prevention and control.
iii. Planning, managing and controlling of assets and resources of the enterprises so as to contain the outcome of disastrous events which can seriously affect the effective operations of the business enterprises.

1.4 RESEARCH HYPOTHESIS
It will be worthwhile to give the definition of hypothesis for better appreciation and understanding of this piece of work.
A hypothesis is simply a claim of a proposition made about a population, which is subject to test to determine its validity or otherwise.
H0: (1) Internal control does not aid in risk management.
HI: Internal control aids in risk management.
H0: (2) The company does not see the need in maintaining adequate segregation of duties.
HI: The company sees need in maintaining adequate segregation of duties.
H0: (3) There is no relationship between the internal control and risk management.
HI: There is relationship between the internal control and risk management.
Based on the above, it is believed that the study will be able to reject or accept the hypothesis.

1.5 SCOPE OF THE STUDY
This study is limited to Zenith Bank Plc. Its focus is on the role of internal control on risk management.
We should appreciate the fact that efficient internal control is necessary as well as essential in the performance and growth of any organization.
Therefore, or the purpose of clarity, simplicity and avoidance of ambiguity, this work will briefly elaborate the internal control and its roles in risk management with reference to Zenith Bank Plc. However, this piece of work might not be a hundred percent (100%) exhaustive treatment of the internal control functions but a considerable work has been done.
ASSUMPTION OF THE STUDY
The following assumptions were made concerning this work.
1. That companies institute sound internal control.
2. Companies formulate internal control policies.
3. Internal control polices can also be faulty.
4. That the internal control is independent of the management.
5. The company uses internal control to monitor and control business operation.
6. Internal control units can help in risk management.
7. Internal control can also be deficient in some areas.

1.7 LIMITATION OF THE STUDY
A lot of limitations and constraints hindered the work of the researcher. Some of these limitations and constraints are as follows:
i. Time Constraint: Bearing in mind the time to carry out the research a result of meeting up with the school calendar, the researcher has to combine both normal academic work and the research work.
ii. Insufficient Fund: The high cost transportation as a result of hunting for information to this research work, since the research was carried out solely from the meager purse of the student, the much needed extensive travels to other banks to examine the roles of internal controls in risk management. However, information from such banks was collected through the questionnaire. Coupled with the clash of lecture periods of the researcher with her research appointment times at the bank continued as a constraint in this research work.
iii. Problems of Gathering Data: Data Collection or gathering was characterized by a lot of difficulties. It should be pointed out that the level of literacy is still low in this country while that of illiteracy is high. This high illiteracy rate credited a lot of obstacles, such as non-response to questionnaires administered. However, these problems not withstanding, the researcher was able to produce a presentable research work.

1.8 OPERATIONAL DEFINITION OF TERMS
1. Internal Control: This is the whole system of control, finance and otherwise by the management in order to carry on the business of the enterprise in an orderly and efficient manner to ensure adherence to management policies, safeguard he assets and secure as far possible the completeness and accuracy of the records.
2. Roles: Oxford Advance Learners dictionary (2000) defined role as the function or position that has or is expected to have in an organization, in society or in a relationship.
3. Risk: According to Anyanwu (2007) Risk can be defined as the general uncertainty, doubt, and chance of, or in insuring the insured objects.
4. Management: Ejiofor (1984) defined management as art of science of working in an organization through being directed by and by directing and coordinating the activities of people to achieve the goals of an organization.
5. Risk Management: According to Anyanwu (2007) defines it as the identification, measurement and the economic control of risks that threaten the asset of any business. It can also be defined as the planning, managing and controlling of activities and measures taken in order to minimize the impact of uncertain events.
6. Vulnerable: Weak and easily hurt physically or emotionally. According to the oxford learner’s dictionary (2000).
7. Auditor: According to B.N. Okezie (2004) Auditor can be defined as an accountant who has undergone a recognized professional course and is a member of the recognized Accountancy Bodies resident in Nigeria and who is carrying out a professional Accountancy practice.