Do Chief Risk Officers and Risk Committees Perform a Role in Addressing Environmental, Social and Governance Risk?

• In Event: Accounting, Government, and Regulations

Abstract

This research investigates the association between Risk Committees and Chief Risk Officers with firms’ exposure to environmental, social and governance [ESG] risks. We find that the creation of a Risk Committee and/or appointment of a Chief Risk Officer [RC/CRO] is associated with an increase in firms pursuing ESG opportunities as well as the identification of additional ESG risks. We also find that firms with RC/CROs report a higher number of internal control weaknesses, but that subsequent to the appointment of a RC/CRO their control environment improves. This suggests that RC/CROs supplement or enhance the function of audit committees in improving financial statement quality.

Authors

• Angel Arturo Pacheco Paredes, Texas A&M International University

• Clark M Wheatley, Florida International University