EFFECTIVENESS OF RISK MANAGEMENT PRACTICES IN LOCAL GOVERNMENT

Abstract

The study aimed to examine the influence of internal audit characteristics, risk management practices, and institutional factors on risk management effectiveness in Local Government Authorities (LGAs) in the Njombe Region, Tanzania. A quantitative approach, guided by the positivist philosophy, used structured questionnaires to gather data from internal auditors, audit committee members, risk management committee members, and other staff. A descriptive research design was adopted, and stratified and simple random sampling resulted in 72 respondents. Data analysis included both descriptive statistics (frequencies and means) and inferential statistics (correlation analysis), with qualitative data from open-ended questions analyzed using thematic analysis. Reliability was ensured through Cronbach’s alpha, and validity was strengthened through pre-testing and established measures. Ethical considerations, including informed consent and confidentiality, were rigorously maintained throughout the study. The study revealed that internal audit practices significantly enhance risk management, with 40% of respondents stating that internal audit reports "always" provide actionable recommendations. Regression analysis showed that internal audit practices accounted for 72% of the variance in risk management effectiveness (R squared = 0.72, F-statistic = 24.18, p < 0.001), with a Beta value of 5.15, indicating that for every unit improvement in internal audit practices, risk management effectiveness increased by 5.15 units. Regarding audit committee independence, 35.71% of respondents perceived the committee as independent, and 42.86% noted that the committee always raises concerns about risk management, with an R-squared of 0.67 and a Beta value of 4.95, indicating an improvement of 4.95 units in risk management effectiveness. For the risk management committee, 42.86% rated members as very knowledgeable, and 71.42% believed the committee’s composition aligned with the organization's risk profile, with an R-squared of 0.71 (F-statistic = 27.41, p < 0.001) and a Beta value of 5.05, demonstrating its positive impact on risk practices. The study recommended enhancing audit report clarity, providing regular training for audit.