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Michalis Bekiaris, Thanasis Efthymiou, Andreas G. Koutoupis



The 2007 was the year that the global economic crisis broke which resulted in the creation of a recession situation in almost the entire world. During this period, there were significant weaknesses in corporate governance, which refer to the practices followed by the board in risk management and shareholders’ activism. The rapid growth in new products and changes in market structure can affect the development of processes and infrastructure of risk management. It is generally accepted that risk management, prevented businesses to fully identify the nature and severity of the recent economic crunch that the market faced. As the financial crisis is increasingly affecting the economic activities, the basic objective of internal audit directors is to find ways to add value to the business. The adoption of ERM should not be panacea for effective risk management, as well as empirical evidence suggests that the application does not indicate the existence of a protective shield. It should be noted that internal audit is a subset of risk management and may not have received the attention it deserved, despite the fact that the EPM is already running. Regarding the role of internal audit in the financial crisis, it needs to assess business activities, strategies, and thus the risk posed to business. Therefore, it should focus on issues such as the evaluation of existing business capabilities, collaboration with other risk and control functions, participation in meetings with major shareholders, assisting in business development for short-term strategies, etc. The purpose of this paper, is to record the current situation regarding the mode of interaction of the economic crisis in corporate governance and risk management. This is achieved by conducting research which underpins the distribution of structured questionnaires in Greeks professionals. In this way, it is presented a substantial imprinting of Greek views on a number of issues arising from the investigation of the above relation. In order to gather as much as possible essential information, it is performed a comparison of these global positions, by surveys carried out by the IIA, which had almost the same content. The conclusion is that the current economic conditions require a more effective form of corporate governance, while the three main weaknesses mentioned above are the areas that more focus should be given. Additionally, the most important factor that could highlight all risks in time is to perform audits on liquidity, capital and balance sheet consolidation. Still, there is a view that the ERM failed to recognize timely the danger of imminent economic crisis. Finally, budgets on internal audit have increased significantly, both in national and international level, while in the future the internal audit itself should have as a priority to consult the board, in order to identify, manage and monitor the key risks.

Keywords: Economic Crisis, Corporate Governance, Internal Audit, Greece

How to cite this paper: Bekiaris, M., Efthymiou, T., & Koutoupis, A. G. (2013). Economic crisis impact on corporate governance & internal audit: the case of Greece. Corporate Ownership & Control, 11(1), 55-64.