Abstract

The quality of the financial statements is vital for sound decision-making. Indonesian banking institutions plan and monitor the risk response for the quality of their financial statements with less innovation and strategy. The primary objective of this study is to explore the impact of risk management on the quality of financial statements in the Indonesian banking sector. This study focuses specifically on three aspects of risk management: planning risk responses, implementing risk responses, and monitoring risk. The research employed a cross-sectional methodology to collect data, and the respondents were financed department personnel from several Indonesian banking institutions. This study's approach is a fantastic contribution to the body of knowledge, as previous research ignored these aspects for measuring the quality of financial statements. From the standpoint of three critical elements of risk management and mediating influence on profitability, the study provided significant theoretical implications for understanding financial statements' quality. Practically, this research proved that planning risk responses, implementing risk responses, and monitoring risk are viable strategies for the quality of financial statements in banking firms. The research has several limitations, outlined alongside clear recommendations for future study.