Quantitative Analysis of IFRS Compliance and Operational Risk in Nigeria
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Background of the Study
Operational risk, defined as the risk of loss resulting from inadequate or failed internal processes, systems, or external events, is a significant concern for financial institutions globally. In Nigeria, the adoption of International Financial Reporting Standards (IFRS) has brought about a greater emphasis on transparency, accuracy, and consistency in financial reporting, which directly impacts how operational risks are identified, reported, and managed. As Nigerian firms and financial institutions increasingly comply with IFRS, the question arises as to how this compliance influences operational risk management.
IFRS, with its focus on fair value accounting, comprehensive disclosures, and internal control systems, may have significant implications for how operational risks are managed and reported in Nigeria. However, while the relationship between IFRS compliance and risk management has been explored in other contexts, limited research has been done in Nigeria. This study seeks to quantitatively analyze the relationship between IFRS compliance and operational risk in Nigerian firms and financial institutions, assessing how IFRS adoption affects operational risk exposure and the strategies employed to mitigate such risks.
Statement of the Problem
Despite the widespread adoption of IFRS in Nigeria, there is a lack of empirical evidence on how IFRS compliance impacts operational risk management. Given the complex and evolving nature of operational risks, it is critical to investigate how IFRS adoption influences these risks, especially within Nigerian firms, where regulatory, economic, and institutional challenges are unique. This study aims to fill this gap by providing a quantitative analysis of the relationship between IFRS compliance and operational risk in Nigeria.
Aim and Objectives of the Study
The aim of this study is to quantitatively explore the relationship between IFRS compliance and operational risk in Nigeria. The specific objectives are:
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To assess the level of IFRS compliance among Nigerian firms, especially in the financial sector.
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To examine the impact of IFRS compliance on the identification, assessment, and management of operational risk in Nigerian firms.
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To analyze whether IFRS compliance has a measurable effect on the operational risk exposure and risk mitigation strategies of Nigerian firms.
Research Questions
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What is the level of IFRS compliance among Nigerian firms, particularly in the financial sector?
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How does IFRS compliance affect the identification, assessment, and management of operational risk in Nigerian firms?
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Does IFRS compliance influence operational risk exposure and risk mitigation strategies in Nigerian firms?
Research Hypotheses
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There is a significant relationship between IFRS compliance and operational risk management in Nigerian firms.
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IFRS compliance positively affects the identification and assessment of operational risks in Nigerian firms.
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IFRS compliance significantly reduces operational risk exposure and enhances risk mitigation strategies in Nigerian firms.
Significance of the Study
This study will provide valuable insights into how IFRS compliance influences operational risk management in Nigerian firms, particularly in the financial sector. The findings will help guide financial institutions, regulators, and policymakers in developing strategies for improving operational risk management in line with international standards.
Scope and Limitation of the Study
The study focuses on Nigerian firms, particularly financial institutions, and their compliance with IFRS between 2012 and 2025. Limitations include potential variations in the quality of compliance across different sectors and difficulty accessing operational risk data from firms.
Definition of Terms
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Operational Risk: The risk of loss due to inadequate or failed internal processes, systems, or external events.
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IFRS Compliance: The adherence to International Financial Reporting Standards in financial reporting and risk management practices.
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Risk Mitigation Strategies: Actions and procedures implemented to reduce or manage risks effectively.
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