Assessing the efficacy of institutional risk management strategies in enhancing financial sustainability: Evidence from Saudi banks

Abstract

This paper develops a model linking the effectiveness of institutional risk management measures to the achievement of financial sustainability within the Saudi corporate environment. Financial sustainability has become essential for enterprises and financial institutions due to increasing economic instability and expanding risk exposure. The study focuses on the role of the enterprise risk committee (ERC) in identifying, planning, and addressing risks to enhance financial sustainability. It further examines how the ERC influences strategic decision-making, corporate governance, and regulatory compliance, and how these factors affect key financial performance indicators, including earnings per share (EPS), return on equity (ROE), and return on assets (ROA). A descriptive analytical approach is applied to a sample of ten Saudi banks to examine the relationship between financial sustainability and ERC characteristics, including committee size, meeting frequency, and member independence. The findings reveal a strong positive relationship between ERC effectiveness and financial sustainability, highlighting the importance of proactive risk management in strengthening banking governance. The study provides empirical evidence of the ERC’s contribution to financial resilience and offers recommendations to improve committee effectiveness, emphasizing the need to strengthen governance practices and risk oversight mechanisms to support long-term financial sustainability in the Saudi banking sector.