Competitive strategies-performance nexus and the mediating role of enterprise risk management practices: a multi-group analysis for fully fledged Islamic banks and conventional banks with Islamic window in Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Waqas Ali ◽  
Imran Ibrahim Alasan ◽  
Mushtaq Hussain Khan ◽  
Shujahat Ali ◽  
Jun-Hwa Cheah ◽  
...  
Keyword(s):  
Risk Management ◽  
Management Practices ◽  
Low Cost ◽  
Enterprise Risk Management ◽  
Islamic Banks ◽  
Competitive Strategies ◽  
Content Type ◽  
Differentiation Strategy ◽  
Enterprise Risk ◽  
Conventional Banks

Purpose This paper aims to investigate whether the effect of competitive strategies on the performance is significantly different for fully fledged Islamic banks vis-a-vis conventional banks with Islamic window. Specifically, two competitive strategies namely the low-cost strategy and the differentiation strategy were considered. In addition, we examined further the competitive strategies–performance nexus by introducing enterprise risk management as a mediating factor. Design/methodology/approach This study used structured questionnaires to collect data from 506 respondents (251 from fully fledged Islamic banks and 255 from conventional banks with Islamic window). A disjoint two-stage approach was employed to analyze a hierarchical component model. Construct Level Correction and Measured Latent Marker Variable approaches were employed to assess the common method variance. As a robustness check, two-stage approach was used to explore the curvilinear relationship, and the Gaussian copula approach was adopted to address the endogeneity issue. Findings The findings show the evidence of complementary partial mediation in the relationships between low-cost strategy, differentiation strategy, and performance through enterprise risk management practices in both types of banks. Practical implications Competitive strategies are essential as they send signals to owners, managers, policymakers, and regulatory authorities. On the one hand, fully fledged Islamic banks face dual competition from pure conventional counterparts as well as conventional banks with Islamic window. On the other hand, Islamic window banks also face strong competition from the fully fledged Islamic banks due to their strong Shariah roots. Hence, this competitive pressure on both types of banks calls for more attention to focus on competitive strategies and enterprise risk management practices to accelerate their performance and overcome the bank risk. Moreover, these competitive strategies can be used as a tool to enter into a new market by reducing costs and risks. Besides, banks cannot achieve a competitive advantage without implementing enterprise risk management practices because competitive strategies are significant antecedents of enterprise risk management practices. Therefore, this study recommends both types of banks to focus on enterprise risk management practices to make these strategies successful. Originality/value To the best of our knowledge, this is the first study to examine the competitive strategies–performance nexus and the mediating role of enterprise risk management practices in an unexplored area of Islamic banking.

Risk and risk management practices

2020 ◽  
Vol 11 (8) ◽  
pp. 1555-1581 ◽  
Author(s):  
Adel Elgharbawy
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Management Practices ◽  
Archival Data ◽  
Islamic Banks ◽  
Monitoring And Control ◽  
Content Type ◽  
Different Types ◽  
Conventional Banks ◽  
And Control

Purpose This study aims to compare types and levels of risk and risk management practices (RMPs) including the recognition, identification, assessment, analysis, monitoring and control of risk in both Islamic and conventional banks. Design/methodology/approach A questionnaire survey was conducted among the Islamic and conventional banks in Qatar, together with an analysis of archival data extracted from the Thomson Reuters Eikon database for the period 2009-2018. Data were analysed using descriptive statistics, ANOVA and regression analysis. Findings Islamic banks encounter unique types and levels of risk that are not encountered by conventional banks. In Islamic banks, risks such as those of operation and Sharia non-compliance are perceived to be higher, while in conventional banks other risks such as those of credit and insolvency are higher; other risks, for example, liquidity risk, are faced by both. RMPs are determined by understanding risk and risk management, risk identification, risk monitoring and control and credit risk analysis, but not by risk assessment and analysis. However, the RMPs of the two types of bank are not significantly different, except in the analysis of credit risk. Research limitations/implications The study contributes to the debate in the literature by developing a better understanding of the dynamism of risk management in Qatari banks, which can be extended to similar contexts in the region. However, the relatively small sample size in only one country limits the possibility of generalizing the findings. The survey methodology is based on the perception of bankers rather than their actual actions and does not provide in-depth analysis for each type of risk, especially credit risk. However, using archival data, in addition to those from the survey, minimises the bias that would result from depending on one source of data. Practical implications The study provides valuable insights into the different types and levels of risk, as well as the RMPs in Islamic and conventional banks, which can help in guiding the future development and regulation of risk management in the banking sector of Qatar and its region. Originality/value The study helps to explain the mixed results of previous studies that compare types and levels of risk and RMPs in Islamic and conventional banks. Using different types of data and analysis, it provides evidence from one of the fastest growing economies in the world. It also addresses the concerns over RMPs in banks since the global financial crisis.

Enterprise risk management: history and a design science proposal

2018 ◽  
Vol 19 (2) ◽  
pp. 137-153 ◽  
Author(s):  
Michael McShane
Keyword(s):  
Risk Management ◽  
Management Practices ◽  
Design Science ◽  
Enterprise Risk Management ◽  
Content Type ◽  
Research And Practice ◽  
Enterprise Risk ◽  
Risk Management Process ◽  
Management Concepts ◽  
Science Approach

Purpose This paper aims to investigate the evolution of enterprise risk management (ERM) out of fragmented disciplinary perspectives to provide a foundation for promoting interdisciplinary research and proposes a design science approach for more effective ERM implementation in organizations. Design/methodology/approach This conceptual paper synthesizes ERM research and practice from multiple disciplines. Findings Corporate risk management concepts were born in academic finance and developed further in the finance subset known as risk management and insurance. With the advent of ERM, efforts must broaden beyond applying statistical models to quantifiable risks. Other disciplines have expanded ERM research by embracing techniques to investigate risk management practices to produce knowledge that integrates practice and theory. ERM is promoted as integrated risk management, yet silos still remain in both practice and research. Originality/value This study provides a foundation and a proposal for moving ERM past academic and organizational silos, which is necessary to achieve the ERM philosophy and increase organizational resilience. Understanding the evolution and fragmented nature of ERM research and practice provides a foundation for interdisciplinary cooperation necessary to achieve the holistic ERM philosophy. A next frontier is effective ERM implementation. This paper argues for an organizational design science approach for mitigating the resistance to change that confounds effective implementation of ERM in organizations facing an increasingly uncertain environment and outlines future research for applying the approach to implementing the ISO 31000 risk management process.

Analysis of enterprise risk management practices in Malaysian waqf institutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rubayah Yakob ◽  
Mohd Hafizuddin-Syah Bangaan Abdullah ◽  
Sajiah Yakob ◽  
Nooraida Yakob ◽  
Nurul Hidayah Md. Razali ◽  
...  
Keyword(s):  
Risk Management ◽  
Management Practices ◽  
Enterprise Risk Management ◽  
Successful Implementation ◽  
Management Support ◽  
Structured Interviews ◽  
Research Attention ◽  
Content Type ◽  
Mean Values ◽  
Enterprise Risk

Purpose This study aims to assess enterprise risk management (ERM) practices in waqf institutions (WIs) along with their strengths and weaknesses; highlight ERM trends in WIs; and determine the best ERM practices for these institutions. Design/methodology/approach Data were collected via structured interviews with nine WI managers in Malaysia. A standardised questionnaire was adopted for the interviews, which focussed on ERM implementation in WIs. The collected data were analysed in three steps, namely, data reduction, data display and verification/conclusion. The frequency distribution of these data were then illustrated and the mean values and differences of the studied groups/variables were examined. Findings WIs have a sub-optimal ERM implementation, whose aspects need to be improved over time. These institutions have focussed on their ERM practices at the strategic level yet ignored those at the operational level. Specifically, WI officers have well-defined internal environments and objectives, but risk monitoring, which ensures effective implementation of ERM, is lacking. The presence of risk management committees and units may be linked with the successful implementation of ERM. However, ERM knowledge and top management support do not show clearly associations with ERM implementation. WIs should focus on improving their ERM implementation governance. Research limitations/implications Findings underscore the need for WIs to launch a formal ERM programme and for relevant stakeholders to create the appropriate infrastructures that support ERM implementation, including amended rules, ERM policies and allocated funds for training and education, to promote ERM implementation knowledge and awareness. The successful implementation of ERM not only improves the service quality, sustainability and performance of WIs but also promotes the national waqf agenda as a key economic driver. Originality/value ERM in non-profit organisations, such as WIs, has received limited research attention relative to that in profit-driven organisations despite having unique risks. To the best of the knowledge, this study is the first to identify those trends that explain ERM practices and to determine the ERM best practices of WIs.

Does the hiring of chief risk officers align with the COSO/ISO enterprise risk management frameworks?

2017 ◽  
Vol 25 (3) ◽  
pp. 274-295 ◽  
Author(s):  
Erastus Karanja
Keyword(s):  
Risk Management ◽  
Enterprise Risk Management ◽  
Clear Understanding ◽  
Press Releases ◽  
Apparent Lack ◽  
Content Type ◽  
Business Operations ◽  
Enterprise Risk ◽  
The Press ◽  
Iso 31000

Purpose There are two main industry-sanctioned enterprise risk management (ERM) models, that is, COSO 2004 and ISO 31000:2009, that firms refer to when implementing ERM programs. Taken together, the two ERM models specify that firms should implement ERM programs to meet a strategic need, improve operations and reporting or to comply with government regulations or industry best practices. In addition, the focus of ERM implementation should be either the subsidiary, business unit, division, firm/entity or global level. The purpose of this study is to investigate whether firms are aligning their ERM implementations with these tenets: strategy, operations, reporting, compliance and the level of implementation. Design/methodology/approach The proxy for ERM implementation is the hiring of a Chief Risk Officer (CRO). The research data come from a sample of 122 US firms that issued a press release following the hiring of a CRO between 2010 and 2014. The press releases were retrieved and aggregated through content analysis in LexisNexis Academic. Findings The results reveal that many ERM implementations are occurring at the firm/entity level, and with the exception of reporting, firms consider ERM to be a strategic firm resource capable of improving business operations and compliance initiatives. Originality/value There is a dearth of research studies specifically investigating whether ERM programs adopted by firms are aligned with the specification of COSO 2004 and ISO 31000:2009 frameworks. The apparent lack of a clear understanding of the alignment between the firm ERM programs and the industry’s ERM frameworks may limit the development and implementation of ERM and the eventual realization of the benefits associated with a successful ERM implementation.

Integration of Islamic bank specific risks and their impact on the portfolios of Islamic Banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Syed Alamdar Ali Shah ◽  
Raditya Sukmana ◽  
Bayu Arie Fianto
Keyword(s):  
Risk Management ◽  
Portfolio Diversification ◽  
Islamic Banks ◽  
Content Type ◽  
Management Framework ◽  
Risk Return ◽  
Islamic Bank ◽  
Risk Management Framework ◽  
Impact Risk ◽  
Conventional Banks

Purpose This study aims to propose a risk management framework for Islamic banks to address specific risks that are unique to Islamic bank settings. Design/methodology/approach A unique methodology has been developed first by exploring the dynamics and behaviors of various risks unique to Islamic banks. Second, it integrates them through a series of diagrams that show how they behave, integrate and impact risk, returns and portfolios. Findings This study proposes a unique risk-return relationship framework encompassing specific risks faced by Islamic banks under the ambit of portfolio theory showing how Islamic banks establish a steeper risk-return path under Shariah compliance. By doing so, this study identifies a unique “Islamic risk-return” nexus in Islamic settings as an explanation for the concern of contemporary researchers that Islamic banks are more risky than conventional banks. Originality/value The originality of this study is that it extends the scope of risk management in Islamic banks from individual contract-based to an integrated whole, identifying a unique transmission path of how risks affect portfolio diversification in Islamic banks.

Enterprise risk management and sustainability of banks performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Babajide Oyewo
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Management Practice ◽  
Enterprise Risk Management ◽  
Annual Reports ◽  
Banking Reform ◽  
Content Type ◽  
Enterprise Risk ◽  
The Impact

PurposeThis study investigates firm attributes (namely level of capitalisation, scope of operation, organisational structure, organisational lifecycle, systemic importance and size) affecting the robustness of enterprise risk management (ERM) practice, the extent to which ERM affects the performance of banks and the impact of ERM on the long-term sustainability of banks in Nigeria. This was against the backdrop that the 2012 banking reform was a major regulatory intervention that mainstreamed ERM in the Nigerian banking sector.Design/methodology/approachThe study employed a mixed methodology of content, trend and quantitative analyses. Ex post facto research design was deployed to analyse performance differential of banks, with respect to the implementation of ERM, over a 10-year period (2008–2017). A disclosure checklist developed from the COSO ERM integrated framework was used to assess the robustness of ERM by content-analysing divulgence on risk management in published annual reports. The banking reform periods were dichotomised into pre- (2008–2012) and post- (2013–2017) reform periods. Jonckheere–Terpstra test, independent sample t-test and Mann–Whitney test were applied to analyse a total of 1,036 firm-year observations over the period 2008–2017.FindingsResult shows that bank attributes significantly affecting the robustness of risk management practice are level of capitalisation, scope of operation, systemic importance and size. Performance of banks improved slightly during the post-2012 banking reform period. This suggests that as banks consolidate on the gains of ERM, benefits of the regulatory policy on risk management may be realised in the long run. Result also shows that ERM enhances long-term performance, connoting that effective risk management could serve as a competitive strategy for surviving turbulence that typically characterises the banking sector.Practical implicationsThe emergence of level of capitalisation, scope of operation, systemic importance and size as determinants of ERM provides empirical evidence to support the practice of reviewing the capital requirements for banking business from time to time by regulatory authorities (i.e. recapitalisation policy) as a strategy for managing systemic risk. Top management of banks may consider instituting mechanisms that will ensure risk management is given prominence. A proactive approach must be taken to convert risks to opportunities by banks and other financial institutions, going forward, to cope with the vicissitudes of financial intermediation.Originality/valueThe originality of the study stems from the consideration that it provides some new insights into the impact of ERM on banks long-term sustainability in a developing country. The study also contributes to knowledge by exposing the factors determining the robustness of risk management practice. The study developed a checklist for assessing ERM practice from annual reports and other risk management disclosure documents. The paper also adds to the scarce literature on risk governance and risk management.

Enterprise risk management and Solvency II: the system of governance and the Own Risk and Solvency Assessment

2020 ◽  
Vol 21 (4) ◽  
pp. 317-332 ◽  
Author(s):  
Pablo Durán Santomil ◽  
Luis Otero González
Keyword(s):  
Risk Management ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Enterprise Risk Management ◽  
Insurance Companies ◽  
Legal Form ◽  
Content Type ◽  
Enterprise Risk ◽  
Solvency Assessment

Purpose The purpose of this paper is to analyze how enterprise risk management (ERM), the system of governance and the Own Risk and Solvency Assessment (ORSA) have been boosted with the entry of Solvency II. Design/methodology/approach For this analysis, the authors have undertaken a survey of chief risk officers (CROs) working in Spanish insurance companies. Findings The results show that Solvency II has definitely promoted ERM in the European insurance industry and improved the system of governance of the insurance companies, and that the perceived value of the ORSA for the companies is higher than the cost. It is clear that the quality of ERM implemented by companies is higher in those that face more complex risks and with greater interdependencies – that is, larger companies, foreign insurers and insurers with several lines of business – but is unaffected by the legal form of the entity (mutual/corporation). Originality/value This study conducts primary research with surveys of CROs and develops a measure of the quality of ERM implemented by insurance companies.

Enterprise risk management and bow ties: going beyond patient safety

2019 ◽  
Vol 26 (3) ◽  
pp. 770-785
Author(s):  
Hossam Elamir
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Patient Safety ◽  
Assessment Tool ◽  
Enterprise Risk Management ◽  
Risk Assessment Tool ◽  
Management Tool ◽  
Content Type ◽  
Enterprise Risk ◽  
Bow Tie

Purpose The growing importance of risk management programmes and practices in different industries has given rise to a new risk management approach, i.e. enterprise risk management. The purpose of this paper is to better understand the necessity, benefit, approaches and methodologies of managing risks in healthcare. It compares and contrasts between the traditional and enterprise risk management approaches within the healthcare context. In addition, it introduces bow tie methodology, a prospective risk assessment tool proposed by the American Society for Healthcare Risk Management as a visual risk management tool used in enterprise risk management. Design/methodology/approach This is a critical review of published literature on the topics of governance, patient safety, risk management, enterprise risk management and bow tie, which aims to draw a link between them and find the benefits behind their adoption. Findings Enterprise risk management is a generic holistic approach that extends the benefits of risk management programme beyond the traditional insurable hazards and/or losses. In addition, the bow tie methodology is a barrier-based risk analysis and management tool used in enterprise risk management for critical events related to the relevant day-to-day operations. It is a visual risk assessment tool which is used in many higher reliability industries. Nevertheless, enterprise risk management and bow ties are reported with limited use in healthcare. Originality/value The paper suggests the applicability and usefulness of enterprise risk management to healthcare, and proposes the bow tie methodology as a proactive barrier-based risk management tool valid for enterprise risk management implementation in healthcare.

Management Accounting And Risk Management Practices In Financial Institutions

2012 ◽  
Author(s):  
Siti Zaleha Abdul Rasid ◽  
Abdul Rahim Abdul Rahman
Keyword(s):  
Risk Management ◽  
Financial Institutions ◽  
Management Practices ◽  
Management Accounting ◽  
Enterprise Risk Management ◽  
Chief Financial Officers ◽  
Operational Risks ◽  
Enterprise Risk ◽  
Budgetary Control ◽  
Contemporary Management

Tujuan kertas kerja ini adalah untuk melaporkan hasil kajian terhadap amalan perakaunan pengurusan dan amalan pengurusan risiko di institusi kewangan. Data dikutip menggunakan borang soal selidik yang dihantar kepada 106 institusi kewangan yang tersenarai di dalam website Bank Negara Malaysia, di mana Ketua Pegawai Kewangan atau pegawai terkanan di jabatan kewangan institusi–institusi tersebut dilantik sebagai responden kajian. Analisis amalan perakaunan pengurusan berdasarkan kerangka IFAC (1998) menunjukkan bahawa amalan yang lazim diguna pakai adalah amalan di peringkat pertama, diikuti dengan amalan selepas era 1995. Dapatan ini menunjukkan bahawa amalan perakaunan pengurusan tradisional masih diguna pakai secara meluas oleh institutsi-institusi kewangan di Malaysia walapun amalan–amalan kontemporari (peringkat ke 4 dan ke atas) telah diperkenalkan. Bagi amalan pengurusan risiko, kebanyakan institusi telah melaksanakan kerangka Enterprise Risk Management (ERM) secara menyeluruh atau sebahagian. Amalan perakaunan pengurusan berkaitan penyata kewangan dan analisis nisbah dianggap sebagai memberikan sumbangan utama kepada pengurusan risiko. Kawalan belanjawan, belanjawan dan pengurusan strategik juga dianggap penting dalam pengurusan risiko operasi. Kata kunci: Perakaunan pengurusan; pengurusan risiko; institusi kewangan The aim of this paper is to report the results of a study on management accounting and risk management practices in financial institutions. The research method involved administering a questionnaire to 106 financial institutions listed on the Malaysian Central Bank’s website and the respondents were the chief financial officers (CFO) or the most senior positions in the finance department of the institutions. Based on the IFAC’s (1998) framework, it was found that the most widely practiced were the management accounting practices at Stage 1, followed by practices of Post 1995. This finding shows that despite the emergence of contemporary management accounting practices (Stage 4 onwards), traditional management accounting that focuses on financial performance and budgetary control is still widely practiced by financial institutions in Malaysia. As for the risk management practices, most of the firms have either implemented a complete or partial Enterprise Risk Management (ERM) framework. The findings from the survey showed that management accounting practices related to financial statement and ratio analysis were perceived to contribute most towards risk management. Budgetary control, budgeting and strategic planning were also perceived to be important in managing operational risks. Key words: Management accounting; risk management; financial institutions

Strategic merge: a gain or a gamble – the case of Telco China

2019 ◽  
Vol 9 (2) ◽  
pp. 1-23
Author(s):  
Wing Sun Li
Keyword(s):  
Undergraduate Students ◽  
Business Performance ◽  
Joint Venture ◽  
Low Cost ◽  
Emerging Market ◽  
High Tech ◽  
Competitive Strategies ◽  
Content Type ◽  
Differentiation Strategy ◽  
Academic Level

Learning outcomes By reviewing the case study, readers are expected to understand the constraints of competitive strategies in a shifting environmental landscape; the difficulties of foreign companies to sustain in an emerging market with government interventions; the subtlety of joint venture (JV) formation by partners with very divergent background, priority and agenda; evaluation of behavioural orientations of partnership and JV operational arrangements as determinants of a successful JV strategy. Case overview/synopsis High-tech companies can enjoy super profits from their products when only a few competitors can compete with them technologically. However, these companies also nurture a high-cost operational culture that sets a constraint for their further growth when superiority of the technology can no longer be maintained. High-tech companies may reposition their businesses with a strategic shift from differentiation strategy to cost focus strategy. The attendant shift as well as synchronization problem in an organization may require a larger effort to revamp. This case describes a global telecom infrastructure company with successful business performance in China in her early establishment with a pre-emptive technological edge. Mitigation of technological superiority and the rise of local competitors have forced the Company to opt for a cooperative strategy with a local player in the establishment of a low-cost joint venture. Does the new joint venture facilitate the strategic shift or just create an illusion of cooperation? Complexity academic level Undergraduate students and post graduate students taking strategic management course. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS 11: Strategy.

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