Exploring Risk Management Disclosure Practices In Non Profit Organisations In Malaysia

Abstract

This study examines the extent of risk disclosure of NPOs in Malaysia. The level of risk disclosure examined is based on six main risks; organizational risk, operational risk, compliance risk, financial risk, reputation risk and money laundering risk. The extent of risk disclosures are examined based on content analysis of annual reports of 50 NPOs registered under Companies Commission of Malaysia (CCM) as Companies Limited by Guarantee (CLBG) that had been chosen randomly for the financial period of 2011. The result of this study found that most of the organisations are more motivated to disclose financial item in order to comply with mandatory requirements of the financial reporting requirements and other regulatory requirements in Malaysia. However, there are lower incentives for voluntary disclosures under governance, operational, compliance, reputation and money laundering risks. Overall, the statistical results from six variables had indicated that there is lack of risk disclosure item reported in the annual report and it will increased the likelihood of risks that may harm the organisations. This study provides a significant feedback to NPOs in Malaysia to analyse the level of risk they exposed to as well as to formulate the best strategy in tightening their risk management as an early prevention to the likelihood of fraud occurrences. Besides, this study can help to facilitate the regulatory body such as CCM in formulating new requirements, policies, procedures, and guidelines and also to facilitate them in revising and strengthening the existing regulation for organisation to establish NPO and law enforcement in deterring fraudulent activities.

Keywords:  Non-profit organisations, Unique Risks, Organizational Risk, Operational Risk, Compliance Risk, Financial Risk, Reputation Risk, Money Laundering Risk