The Mechanism of Internal Financial Supervision on Corporate Financial Risk Control
Keywords:
Internal Financial Supervision; Financial Risk Control; Internal Control; Intelligent Risk Control; Risk Early WarningAbstract
Against the backdrop of deep digital economy penetration, the emergence of diversified financial formats, and tightening macro financial supervision, market risks, operational risks, compliance risks and new types of financial risks derived from digitalization intersect and spread. External supervision alone fails to meet differentiated risk governance demands of various entities. As an endogenous risk prevention and control carrier of enterprises, internal financial supervision enables refined management covering the full chain of financial accounting, capital management, investment and financing, and internal auditing, constituting a core research direction in financial governance and risk control. This paper systematically reviews relevant literature, sorts out research contexts from four dimensions: conceptual definition, theoretical foundation, traditional transmission mechanisms, and digital technology empowerment. It distinguishes diversified business scenarios including physical enterprises, financial institutions, public institutions, micro, small and medium-sized enterprises (MSMEs), and multinational platforms, and summarizes the implementation paths and practical effects of artificial intelligence and digital financial systems in risk identification, early warning and process control. The paper summarizes the theoretical and practical value of existing literature, analyzes current research deficiencies, and extracts future research directions combining digital finance, green transformation and platform economy. It provides theoretical and literature support for enterprises to build an integrated financial supervision and risk control system, as well as subsequent empirical and case studies.
References
Adeniran, I. A., Abhulimen, A. O., Obiki-Osafiele, A. N. (2024). Strategic risk management in financial institutions: Ensuring robust regulatory compliance. Finance & Accounting Research Journal, 6(8), 1582-1596. https://doi.org/10.51594/farj.v6i8.1508
Baharom, Z. (2025). Theoretical and practical insights into digital technologies in internal auditing: a bibliometric analysis of trends and future directions (1980–2024). Discover Data, 3(1), 41. https://doi.org/10.1007/s44248-025-00081-z
Cai, F. (2024). Research on the evolution mode and risk control of financial supervision system. Information Systems and Economics, 5(1), 67-73. https://doi.org/10.23977/infse.2024.050109
Eichengreen, B. (2023). Financial regulation in the age of the platform economy. Journal of Banking Regulation, 24(1), 40-50.https://doi.org/10.1057/s41261-021-00187-9
Fritz-Morgenthal, S., Hein, B., & Papenbrock, J. (2022). Financial risk management and explainable, trustworthy, responsible AI. Frontiers in Artificial Intelligence, 5, 779799. https://doi.org/10.3389/frai.2022.779799
Fritze, L., & Jockel, O. (2025). Developing a Model for an Internal Control System for Usage in Financial Accounting and Controlling. Journal of Financial Risk Management, 14(1), 18-36. https://doi.org/10.4236/jfrm.2025.141002
Hamed, R. (2023). The role of internal control systems in ensuring financial performance sustainability. Sustainability, 15(13), 10206. https://doi.org/10.3390/su151310206
Hamshari, Y. M., Ali, H. Y., & Alqam, M. A. (2021). The relationship of professional skepticism to the risks of auditing and internal control, and the discovery of fraud and core errors in the financial statements in Jordan. Academic Journal of Interdisciplinary Studies, 10(2), 105.https://doi.org/10.36941/ajis-2021-0045
Hanoon, R. N., Khalid, A. A., Hanani, N. (2021). The impact of internal control components on the financial performance, in the Iraqi banking sector. Journal of Contemporary Issues in Business and Government, 27(3), 2518. https://doi.org/10.47750/cibg.2021.27.03.303
Huang, A., Qiu, L., & Li, Z. (2021). Applying deep learning method in TVP-VAR model under systematic financial risk monitoring and early warning. Journal of Computational and Applied Mathematics, 382, 113065. https://doi.org/10.1016/j.cam.2020.113065
Huang, L., Zhuang, Y., Dong, D. (2025). Strengthening of financial regulation and financial enterprise risk-taking: Analysis based on threshold effects, sub-industry heterogeneity, and the moderating role of firm size. International Review of Financial Analysis, 104, 104296. https://doi.org/10.1016/j.irfa.2025.104296
Jiang, D., Ni, Z., Chen, Y., Chen, X., & Na, C. (2022). Influence of financial shared services on the corporate debt cost under digitalization. Sustainability, 15(1), 428. https://doi.org/10.3390/su15010428
Kahihu, P. K., Wachira, D. M., Muathe, S. M. (2021). Managing market risk for financial performance: experience from micro finance institutionin Kenya. Journal of Financial Regulation and Compliance, 29(5), 561-579. https://doi.org/10.1108/JFRC-02-2021-0014
Kalevor, W. M., Reindorf, K. K., Maclean, B. B. (2024). Effective internal control systems and financial risk management: evidence from public universities in Ghana. Journal of Business and Management, 26(2), 24-36. https://doi.org/10.9790/487X-2602072436
Kushnir, N., Los, Z., Shpak, V. (2023). Implementation of the financial monitoring system into the Ukrainian enterprises activity based on the sustainable economic development and green financing concept. IOP Conference Series: Earth and Environmental Science, 1126(1), 012004.https://doi.org/10.1088/1755-1315/1126/1/012004
Landi, G. C., Iandolo, F., Renzi, A., & Rey, A. (2022). Embedding sustainability in risk management: The impact of environmental, social, and governance ratings on corporate financial risk. Corporate Social Responsibility and Environmental Management, 29(4), 1096-1107. https://doi.org/10.1002/csr.2269
Levytska, S., Pershko, L., Akimova, L., Akimov, O., Havrilenko, K., & Kucherovskii, O. (2022). A risk-oriented approach in the system of internal auditing of the subjects of financial monitoring. International Journal of Applied Economics, Finance and Accounting, 14(2), 194-206. https://doi.org/10.33094/ijaefa.v14i2.715
Li, X. (2022). Research on the influencing factors of internet financial risk and its prevention mechanism. Modern Economics & Management Forum, 3(1), 20-24. https://doi.org/10.32629/memf.v3i1.649
Liu, Z., Du, G., Zhou, S. (2022). Analysis of internet financial risks based on deep learning and BP neural network. Computational Economics, 59(4), 1481-1499. https://doi.org/10.1007/s10614-021-10176-9
Mhlanga, D. (2024). The role of big data in financial technology toward financial inclusion. Frontiers Big Data, 7, 1184444. https://doi.org/10.3389/fdata.2024.1184444
Ngo, H. K., Trinh, H. T. T. (2025). The impact of financial risks on bank performance: evidence from Bayesian analysis in Vietnam's commercial banks. Discover Sustainability, 6(1), 515. https://doi.org/10.1007/s43621-025-01246-1
Nneamaka, M., Terzungwe, N., Mohammed, A., Kabir, Y., & Shuaibu, H. (2021). Internal Control System Effectiveness and Fraud Prevention Innigerian Deposit Money Banks. Gusau Journal of Accounting and Finance, 2(4), 20. https://doi.org/10.57233/gujaf.v2i4.86
Ogunsola, K. O., Balogun, E. D., & Ogunmokun, A. S. (2021). Enhancing financial integrity through an advanced internal audit risk assessment and governance model. International Journal of Multidisciplinary Research and Growth Evaluation, 2(1), 781-790. https://doi.org/10.54660/.IJMRGE.2021.2.1.781-790
Ogunmokun, A. S., Balogun, E. D., Ogunsola, K. O. (2021). A conceptual framework for AI-driven financial risk management and corporate governance optimization. International Journal of Multidisciplinary Research and Growth Evaluation, 2(1), 781-790. https://doi.org/10.54660/.IJMRGE.2024.5.1.1217-1222
Okenwa, C. D., Adeyemi, A. F., Orelaja, A. (2024). Predictive analytics in financial regulation: advancing compliance models for crime prevention. IOSR Journal of Economics and Finance, 15(4), 1-7.https://doi.org/10.9790/5933-1504030107
Olivia, E., Pambelum, Y. J., & Defung, F. (2024). The Effectiveness of Internal Supervision and Its Implications for Regional Financial Management. International Journal of Applied Management and Business, 2(2), 107-120. https://doi.org/10.54099/ijamb.v2i2.1108
Oman, W., Salin, M., Svartzman, R. (2024). Three tales of central banking and financial supervision for the ecological transition. Wiley Interdisciplinary Reviews: Climate Change, 15(3), e876. https://doi.org/10.1002/wcc.876
Oradi, J., Asiaei, K., Rezaee, Z. (2020). CEO financial background and internal control weaknesses. Corporate Governance: An International Review, 28(2), 119-140.https://doi.org/10.1111/corg.12305
Panjaitan, N. K., Nurbaiti, N., Daulay, A. N. (2024). Analysis of Financial Regulatory Challenges for the Development of Islamic Banking in Indonesia. Journal La Sociale, 5(5), 1346-1357. https://doi.org/10.37899/journal-la-sociale.v5i5.1383
Rekunenko, I., Koldovskyi, A., Babenko, K. (2025). The impact of financial regulation on financial control efficiency: A comparative analysis of economies. Accounting and Financial Control, 6(1), 13-24. https://doi.org/10.21511/afc.06(1).2025.02
Stellinga, B. (2020). The open-endedness of macroprudential policy. Endogenous risks as an obstacle to countercyclical financial regulation. Business and Politics, 22(1), 224-251. https://doi.org/10.1017/bap.2019.14
Tan, H. (2025). Study on Chinese cross-border e-commerce payments from a" double cycle" standpoint. Journal of Computing and Electronic Information Management, 16(2), 46-50. https://doi.org/10.54097/cnz4mv78
Tanbour, K. M., Ben Saada, M., & Nour, A. N. I. (2026). The impact of implementing an internal control system on banking risk management during crises: a case study on banks operating in Palestine. International Journal of Disclosure and Governance, 23(2), 365-386. https://doi.org/10.1057/s41310-025-00300-8
Zhang, J., Wu, L., & Li, X. (2026). Does digital transformation reduce corporate financial risks? A dual perspective of internal disclosure and external supervision. Transformations in Business & Economics, 24, 55-81. https://doi.org/10.15388/Tibe.2025.24.1.3
Zhelev, Z., & Kostova, S. (2024). Investigating the Application of Digital Tools for Information Management in Financial Control: Evidence from Bulgaria. Journal of Risk and Financial Management, 17, 1-17. https://doi.org/10.3390/jrfm17040165
Zhuang, Y., & Wei, H. (2023). Early warning model and prevention of regional financial risk integrated into legal system. Plos One, 18, e0286685. https://doi.org/10.1371/journal.pone.0286685
