How risk oversight committees reduce banking risk: the amplifying role of digital innovation
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Published:
May 30, 2025
Keywords:
Bank Risk, Corporate Governance, Digital Innovation, Financial Technology, Risk Oversight Committee
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Economy
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Abstract
This study investigates the influence of risk oversight committee characteristics on banking risk. This study also investigates the moderating role of digital innovation between the influence of risk oversight committee characteristics on banking risk. Risk oversight committee effectiveness is measured by five key attributes of committee size, independence, financial expertise, risk management expertise, and meeting frequency. Banking risk is assessed across three critical dimensions which are credit risk, liquidity risk, and operational risk. Digital innovation is operationalized using the Indonesian Digital Innovation Award as a proxy for technological maturity. Samples are 27 publicly listed banks on the Indonesian Stock Exchange from 2017 to 2023. The empirical findings reveal that all risk oversight committee attributes are significantly and negatively associated with banking risk, affirming the importance of governance structures in enhancing risk resilience. Furthermore, digital innovation significantly moderates these relationships, amplifying the risk-reducing effects of each committee attributes of size, independence, financial expertise, risk management expertise, and meeting frequency. These results underscore the synergistic value of integrating governance mechanisms with digital transformation initiatives. The study contributes to the literature by bridging corporate governance and financial technology in a risk management context, and offers practical recommendations for regulators and bank executives to strengthen oversight functions in the digital era
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How to Cite
Ramdani , D. ., Yudhanto, W. ., Aziz, A. A. and Simamora, A. J. . (2025) “How risk oversight committees reduce banking risk: the amplifying role of digital innovation”, Jurnal Mantik, 9(1), pp. 80-89. doi: 10.35335/mantik.v8i5.6339.
References
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Roeser, S., Hillerbrand, R., Sandin, P., & Peterson, M. (2012). Introduction to Risk Theory. In Handbook of Risk Theory (pp. 1–23). Springer Netherlands. https://doi.org/10.1007/978-94-007-1433-5_1
Sarto, F., & Saggese, S. (2022). Board industry expertise and innovation input: evidence on the curvilinear relationship and the moderating effect of CEO. European Journal of Innovation Management, 25(6), 775–803. https://doi.org/10.1108/EJIM-07-2021-0372
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Warta Ekonomi. (2023). Inilah Daftar Pemenang Indonesian Digital Innovation Awards 2023. Warta Ekonomi. https://wartaekonomi.co.id/read490357/inilah-daftar-pemenang-indonesian-digital-innovation-awards-2023
Zheng, H. (2023). Sovereign debt responses to the COVID-19 pandemic. Journal of International Economics, 143, 103766. https://doi.org/10.1016/j.jinteco.2023.103766
Ahn, S. J., & Gam, Y. K. (2024). Window dressing on bank problem loans: Evidence from natural disaster responses. Journal of Accounting and Public Policy, 48, 107262. https://doi.org/10.1016/j.jaccpubpol.2024.107262
Arnold, V. (2025). Indonesia: Bank Century Emergency Liquidity Program. Journal of Financial Crises, 7(1), 230–259.
Atichasari, A. S., Ratnasari, A., Kulsum, U., Kahpi, H. S., Wulandari, S. S., & Marfu, A. (2023). Examining non-performing loans on corporate financial sustainability: Evidence from Indonesia. Sustainable Futures, 6, 100137. https://doi.org/10.1016/j.sftr.2023.100137
Audretsch, D. B., Aronica, M., Belitski, M., Caddemi, D., & Piacentino, D. (2025). The impact of government financial aid and digital tools on firm survival during the COVID-19 pandemic. Small Business Economics, In Press. https://doi.org/10.1007/s11187-025-01014-5
Barroso, M., & Laborda, J. (2022). Digital transformation and the emergence of the Fintech sector: Systematic literature review. Digital Business, 2(2), 100028. https://doi.org/10.1016/j.digbus.2022.100028
Bhatt, T. K., Ahmed, N., Iqbal, M. B., & Ullah, M. (2023). Examining the Determinants of Credit Risk Management and Their Relationship with the Performance of Commercial Banks in Nepal. Journal of Risk and Financial Management, 16(4), 235. https://doi.org/10.3390/jrfm16040235
Bo?a, M., & Zimková, E. (2021). Overcoming the loan-to-deposit ratio by a financial intermediation measure — A perspective instrument of financial stability policy. Journal of Policy Modeling, 43(5), 1051–1069. https://doi.org/10.1016/j.jpolmod.2021.03.012
Bungatang, & Jumady, E. (2021). Banking Financial Performance: Mitigation Forms, Efficiency, Capabilities and Debt. Jurnal Akuntansi, 25(2), 330–346. https://doi.org/10.24912/ja.v25i2.813
Castañer, X., & Oliveira, N. (2020). Collaboration, Coordination, and Cooperation Among Organizations: Establishing the Distinctive Meanings of These Terms Through a Systematic Literature Review. Journal of Management, 46(6), 965–1001. https://doi.org/10.1177/0149206320901565
Demirgüç-Kunt, A., Pedraza, A., & Ruiz-Ortega, C. (2021). Banking sector performance during the COVID-19 crisis. Journal of Banking & Finance, 133, 106305. https://doi.org/10.1016/j.jbankfin.2021.106305
Diener, F., & Špa?ek, M. (2021). Digital Transformation in Banking: A Managerial Perspective on Barriers to Change. Sustainability, 13(4), 2032. https://doi.org/10.3390/su13042032
Fali, I. M., Philomena, O. N., Ibrahim, Y., & Amos, J. (2020). Risk Management Committee Size, Independence, Expertise and Financial Performance of Listed Insurance Firms in Nigeria. International Journal of Research and Innovation in Social Science, IV(V), 313–319.
Harun, C. A., & Gunadi, I. (2022). Financial Stability and Systemic Risk. In Central Bank Policy Mix: Issues, Challenges, and Policy Responses (pp. 73–89). Springer Nature Singapore. https://doi.org/10.1007/978-981-16-6827-2_5
Heubeck, T., & Meckl, R. (2024). Does board composition matter for innovation? A longitudinal study of the organizational slack–innovation relationship in Nasdaq-100 companies. Journal of Management and Governance, 28(2), 597–624. https://doi.org/10.1007/s10997-023-09687-4
Indrawati, S. M., Satriawan, E., & Abdurohman. (2024). Indonesia’s Fiscal Policy in the Aftermath of the Pandemic. Bulletin of Indonesian Economic Studies, 60(1), 1–33. https://doi.org/10.1080/00074918.2024.2335967
Kalogiannidis, S., Kalfas, D., Papaevangelou, O., Giannarakis, G., & Chatzitheodoridis, F. (2024). The Role of Artificial Intelligence Technology in Predictive Risk Assessment for Business Continuity: A Case Study of Greece. Risks, 12(2), 19. https://doi.org/10.3390/risks12020019
Karim, R., Roshid, Md. M., Dhar, B. K., Nahiduzzaman, Md., & Kuri, B. C. (2024). Audit Committee Characteristics and Sustainable Firms’ Performance: Evidence From the Financial Sector in Bangladesh. Business Strategy & Development, 7(4), e70059. https://doi.org/10.1002/bsd2.70059
Kedarya, T., Elalouf, A., & Cohen, R. S. (2023). Calculating Strategic Risk in Financial Institutions. Global Journal of Flexible Systems Management, 24(3), 361–372. https://doi.org/10.1007/s40171-023-00342-3
Kolev, K. D., Schepker, D. J., Wangrow, D. B., & Barker, V. L. (2025). The Board Committee Chair Effect: How Much Does It Contribute to Firm Performance? Journal of Management, 51(4), 1322–1348. https://doi.org/10.1177/01492063231206108
Odubuasi, A. C., Ofor, N. T., & Ugbah, A. (2022). Risk Committee Effectiveness and Financial Performance Indicator of Quoted Firms in Selected African Countries. Journal of Financial Risk Management, 11(03), 634–647. https://doi.org/10.4236/jfrm.2022.113030
Rahman, Md. A. (2024). Are board attributes and ownership structure value relevant in developing economies: new institutionalist perspective. Asian Journal of Accounting Research, 9(1), 67–77. https://doi.org/10.1108/AJAR-04-2022-0125
Rehman, A., Mehmood, W., Ali Alsmady, A., & Sharif, A. (2024). Corruption’s impact on non-performing loans of banks in emerging markets: Empirical insights. Research in Globalization, 9, 100241. https://doi.org/10.1016/j.resglo.2024.100241
Roeser, S., Hillerbrand, R., Sandin, P., & Peterson, M. (2012). Introduction to Risk Theory. In Handbook of Risk Theory (pp. 1–23). Springer Netherlands. https://doi.org/10.1007/978-94-007-1433-5_1
Sarto, F., & Saggese, S. (2022). Board industry expertise and innovation input: evidence on the curvilinear relationship and the moderating effect of CEO. European Journal of Innovation Management, 25(6), 775–803. https://doi.org/10.1108/EJIM-07-2021-0372
Sierra-Morán, J., Cabeza-García, L., González-Álvarez, N., & Botella, J. (2024). The board of directors and firm innovation: A meta-analytical review. BRQ Business Research Quarterly, 27(2), 182–207. https://doi.org/10.1177/23409444211039856
Warta Ekonomi. (2023). Inilah Daftar Pemenang Indonesian Digital Innovation Awards 2023. Warta Ekonomi. https://wartaekonomi.co.id/read490357/inilah-daftar-pemenang-indonesian-digital-innovation-awards-2023
Zheng, H. (2023). Sovereign debt responses to the COVID-19 pandemic. Journal of International Economics, 143, 103766. https://doi.org/10.1016/j.jinteco.2023.103766
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