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A Conceptual Framework for Developing Risk-Based Internal Control Models in the Insurance and Banking Sectors
Subject area: Science,Engineering and Technology · Area of research: Insurance and Banking Sectors
Abstract
Risk-based internal control (RBIC) is now a critical pillar of financial-sector governance, particularly within banking and insurance institutions whose risk exposures are complex, interdependent, and constantly evolving. Despite the existence of major regulatory doctrines such as Basel II/III and Solvency II, many institutions continue to rely on fragmented or compliance-oriented control systems that fail to align control processes with the organisation?s risk profile. This paper develops a conceptual framework for RBIC tailored to the unique operational and regulatory environments of banking and insurance organisations. Drawing exclusively from literature published up to 2017, the study synthesises internal control theory, enterprise risk management (ERM), risk governance research, behavioural models, and financial regulation scholarship. The introduction and literature review critically examine the evolution of internal control, the emergence of risk-based approaches, sector-specific vulnerabilities, regulatory pressures, and implementation challenges. The conceptual framework integrates five core pillars: governance and architecture, risk identification and assessment, control design, information and communication infrastructure, and monitoring and assurance. The framework provides a structured and theoretically grounded approach to strengthening RBIC, enabling financial institutions to enhance resilience, accountability, and supervisory compliance.
Keywords
Risk-Based Internal Control, Risk Governance, Banking Internal Controls, Insurance Risk Management, Enterprise Risk Management, Internal Audit.
How to cite this paper
@article{1712255,
author = {Olawole Akomolafe, Michael Uzoma Agu},
title = {A Conceptual Framework for Developing Risk-Based Internal Control Models in the Insurance and Banking Sectors},
journal = {Iconic Research And Engineering Journals},
year = {2019},
volume = {2},
number = {8},
pages = {335-354},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1712255.pdf},
abstract = {Risk-based internal control (RBIC) is now a critical pillar of financial-sector governance, particularly within banking and insurance institutions whose risk exposures are complex, interdependent, and constantly evolving. Despite the existence of major regulatory doctrines such as Basel II/III and Solvency II, many institutions continue to rely on fragmented or compliance-oriented control systems that fail to align control processes with the organisation?s risk profile. This paper develops a conceptual framework for RBIC tailored to the unique operational and regulatory environments of banking and insurance organisations. Drawing exclusively from literature published up to 2017, the study synthesises internal control theory, enterprise risk management (ERM), risk governance research, behavioural models, and financial regulation scholarship. The introduction and literature review critically examine the evolution of internal control, the emergence of risk-based approaches, sector-specific vulnerabilities, regulatory pressures, and implementation challenges. The conceptual framework integrates five core pillars: governance and architecture, risk identification and assessment, control design, information and communication infrastructure, and monitoring and assurance. The framework provides a structured and theoretically grounded approach to strengthening RBIC, enabling financial institutions to enhance resilience, accountability, and supervisory compliance.},
keywords = {Risk-Based Internal Control, Risk Governance, Banking Internal Controls, Insurance Risk Management, Enterprise Risk Management, Internal Audit.},
month = {February},
}