The Role of Internal Auditing in Enhancing the Effectiveness of Banking Risk Management: A Field Study of a Sample of Libyan Commercial Banks.

Abstract

This study aimed to measure and examine the role of internal audit in enhancing the effectiveness of bank risk management at Wahda Bank and the National Commercial Bank. It specifically investigated the role of internal audit in managing credit risk, operational risk, and market risk. The study was motivated by the importance of internal audit as a key control mechanism that contributes to evaluating risk management systems, assessing the adequacy of internal controls, identifying deficiencies at an early stage, and providing appropriate recommendations for addressing them. The study adopted a descriptive-analytical approach and used a questionnaire to collect data from employees working in departments related to internal audit and risk management at the two banks under investigation. Appropriate descriptive and inferential statistical methods were employed to analyze the data and test the main and sub-hypotheses. The results revealed that internal audit has a positive and statistically significant role in enhancing the effectiveness of bank risk management at Wahda Bank and the National Commercial Bank. Based on these findings, the study proposed a set of recommendations aimed at strengthening the independence of the internal audit function, enhancing the professional competence of internal auditors, and improving coordination between internal audit and risk management departments, thereby contributing to more effective bank risk management.