Modeling the Impact of Corporate Risk Management on Firms’ Financial Performance and Sustainable Growth

2022 ◽  
Vol 40 (1) ◽  
Author(s):  
Tanveer Bagh ◽  
Mirza Muhammad Naseer ◽  
Muhammad Asif Khan
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Positive Impact ◽  
Developed Countries ◽  
Business Environment ◽  
Sustainable Growth ◽  
Global Business ◽  
Corporate Risk Management ◽  
Corporate Risk ◽  
The Impact

Growing complexities in the indigence and global business environment, the demand for Corporate Risk Management (CRM) has fostered greatly. Equally, Financial Performance (FP) and Sustainable Growth Rate (SGR) are believed to be vital parameters for assessing any organisation's success. Both FP and SGR are get affected by different risks. Therefore, to the best of our knowledge, this paper is the first endeavour meant to empirically shed light on the Impact of CRM on a firm’s FP and SGR. By taking a sample of 160 listed Non-Financial firms from emerging and developed Countries stocks markets, on the bases of market capitalization, covering a period of 12 years (2007-2018). The CRM index has been constructed by using the Principal Component Analysis technique. Panel data fixed-effect Model applied on the bases of Hausman test. The results articulated that CRM has a significant and positive impact on ROE and SGR in the context of both cases. In contrast, inflation negatively relates to both scenarios, but the size and Gross Domestic Product (GDP) have a positive and significant relationship with ROE and SGR. However, in Pakistan's case, Size and GDP have articulated adverse effect on ROE and SGR.

scholarly journals CORPORATE RISK MANAGEMENT PRACTICES IN BOSNIA AND HERZEGOVINA COMPANIES

2017 ◽  
pp. 198-216
Keyword(s):  
Risk Management ◽  
Bosnia And Herzegovina ◽  
Management Practices ◽  
Cash Flows ◽  
Business Environment ◽  
Risk Tolerance ◽  
Corporate Risk Management ◽  
Modern Business ◽  
Corporate Risk ◽  
The Impact

Over the last few decades, corporate risk management has become a very important element of management to financial and non-financial companies. In the modern business environment every company is exposed to corporate risk. It can be said that the way to deal with the corporate risk has become a crucial competitive advantage for enterprises in all industry sectors. Reducing the impact of corporate risks such as financial risks, operational risks, strategic and hazardous risks, companies can reduce the volatility of cash flows, thus reducing the expected costs of financial difficulties and agency costs and increase the present value of expected future cash flows. Also, by reducing the volatility of cash flows company increases the likelihood of securing sufficient quantities of its own funds for planned investments, eliminating the need to cut profitable projects or bear the transaction costs of expensive external financing. The paper presents the results of research on the practice of corporate risk management in large non-financial companies in Bosnia and Herzegovina. Data on corporate risk management were collected using a questionnaire. The questionnaire was sent to 120 companies from Bosnia and Herzegovina, where 66 companies provided the required answers to the questions on the basis of which is ultimately formed variable risk that indicates the level of implementation of corporate risk management. Based on the study on the management of corporate risk in Bosnia and Herzegovina it can been concluded that most of the analyzed companies manage corporate risk, at least in certain segments. The largest number of companies actively controls only part of the overall exposure to corporate risk, or are considering the implementation of the complete process of corporate risk management. However, there are still a significant number of companies do not even manage corporate risk, and with them the risk management is primarily a result of occurred events. Although most of the observed companies monitor risks, it is worth pointing out that even 32% of the companies do not elucidate the risk tolerance, and even 45% of companies did not quantify the risks.

Do agency conflicts between managers and shareholders affect corporate risk management and financial performance of Saudi firms?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lamia Jamel ◽  
Hanadi Eid Albogami ◽  
Mazen Abduljahn Abdulaal ◽  
Nuha Ahmed Aljohani
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Conflicts Of Interest ◽  
Stock Exchange ◽  
Risk Level ◽  
Agency Conflicts ◽  
Corporate Risk Management ◽  
Content Type ◽  
Corporate Risk ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of agency conflicts between managers and shareholders on corporate risk management and financial performance of Saudi firms listed in the Saudi Stock Exchange Tadawul. Design/methodology/approach To investigate the effect of agency conflicts between managers and shareholders on corporate risk management and financial performance, we use a sample of 180 Saudi firms listed in the Saudi Stock Exchange Tadawul during the period from 2009 to 2018. Econometrically, we employ Vector Autoregressive (VAR) and General Linear Model (GLM) techniques as an appropriate methodology. Findings Our findings show that the risk level of the last year increase the corporate risk management and the performance of Saudi firm. We remark that the separation amongst control and ownership generates agency conflicts amongst managers and shareholders which can affect their behavior in decision-making and performance of the Saudi firms. Thus, the conflicts of interest arise from the differences among the work horizon, the risk assumed, the performance of enterprises, and the level of remuneration desired by the managers and shareholders in the case of Saudi firms. Originality/value The main contributions of our paper prove that the deepen the study of agency costs linked to a shareholding structure through the analysis of monitoring, obligation, and opportunity costs in the Saudi firms.

scholarly journals On corporate risk management practices in Romanian companies

2009 ◽  
Vol 3 (5-6) ◽  
pp. 85-89
Author(s):  
Alexandra Horobet ◽  
Sorin Dumitrescu ◽  
Cosmin Joldes
Keyword(s):  
Risk Management ◽  
Management Practices ◽  
Business Environment ◽  
Management Systems ◽  
Corporate Risk Management ◽  
Management Approaches ◽  
Traditional Approaches ◽  
Corporate Risk

The purpose of this paper is to provide an understanding of corporate risk management practices in Romanian companies, by investigating the risk management approaches Romanian companies take. Our main findings are that Romanian managers are not aware of the magnitude of exposure their companies have to various types of risk – hazard, operational, financial and strategic risks, while they are able to manage rather well all these risks, even the ones that have the lowest impact on the business. At the same time, risk management systems employed by Romanian companies are rather inarticulate and based on traditional approaches towards risk management, which might represent by itself a major source of risk, given the complexity of the business environment they face.

Risk disclosure and risk governance characteristics: evidence from a developing economy

2020 ◽  
Vol 28 (4) ◽  
pp. 577-605 ◽  
Author(s):  
Shamsun Nahar ◽  
Mohammad Istiaq Azim ◽  
Md Moazzem Hossain
Keyword(s):  
Risk Management ◽  
Developed Countries ◽  
Business Environment ◽  
International Standards ◽  
Risk Governance ◽  
Developing Economy ◽  
Risk Disclosure ◽  
Content Type ◽  
Governance Practices ◽  
The Impact

Purpose The purpose of this paper is to explore to what extent risk disclosure is associated with banks’ governance characteristics. The research also focuses on how the business environment and culture may create a bank’s awareness of risk management and its disclosure. This study is conducted in a setting where banks are not mandated to follow international standards for their risk disclosures. Design/methodology/approach Using 300 bank-year observations comprising hand-collected private commercial bank data, the study uses regression analysis to investigate the influence of risk governance characteristics on risk disclosure. Findings This paper reports a positive relationship between risk disclosure and banks’ governance characteristics, such as the presence of various risk committees and a risk management unit. Practical implications Because studies are lacking on risk disclosure and risk governance conducted in developing countries, it is expected that this research will make a significant contribution to the literature and provide a foundation for further research in this field. Social implications This study complements the corporate governance literature, more specifically the risk governance literature, by incorporating agency theory, institutional theory and proprietary cost theory to provide robust evidence of the impact of risk governance practices in the context of a developing economy. Originality/value Previous studies on risk disclosure and governance determinants primarily involve developed countries. This paper’s contribution is to examine risk disclosure and risk governance characteristics in a developing country in which reporting according to international standards is effectively voluntary.

scholarly journals MANAGING RISK WITH THE USE OF COMPUTER SIMULATION

2021 ◽  
Vol 2 ◽  
pp. 17-23
Author(s):  
Monika Bučková ◽  
Miroslav Fusko ◽  
Gabriela Gabajová ◽  
Martin Gašo ◽  
Branislav Mičieta ◽  
...  
Keyword(s):  
Computer Simulation ◽  
Risk Management ◽  
Simulation Model ◽  
Action Plan ◽  
Business Environment ◽  
Global Business ◽  
Risk Management Methodology ◽  
External Risk ◽  
Managing Risk ◽  
The Impact

Internal and external risk management has become an important issue in today's global business environment, which is fraught with health, natural, political, economic and technical threats. This article deals with the design of a methodology for problem-solving and risk management in connection with computer simulation. The risk management methodology proposed by us consists of individual steps, which are summarized into three stages - risk assessment, risk analysis and risk management. The proposed computer simulation methodology consists of several steps, for example creating a parametric simulation model, designing experiments, analysis of the simulation model results or the evaluation of the simulation results. These steps are described in the article. After completing the previous steps, we describe the points of an action plan and what it must contain to avoid consequences and the impact of risks at the lowest possible level. An example of the use of computer simulation is the risk situation associated with the fluctuation of employees. In the end, the proposed methodology is supported by the results of our research and its further direction.

scholarly journals The impact of credit risk management on the financial performance of United Arab Emirates commercial banks

2021 ◽  
Vol 10 (3) ◽  
pp. 303-319
Author(s):  
Jamil Salem Al Zaidanin ◽  
Omar Jamil Al Zaidanin
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
United Arab Emirates ◽  
Commercial Banks ◽  
Positive Impact ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Capital Adequacy Ratio ◽  
Income Ratio ◽  
The Impact

The main purpose of this study is to measure up to what extent the independent factors defined by capital adequacy ratio, non-performing loans ratio, cost-income ratio, liquidity ratio, and loans-to-deposits ratio impact the financial performance of sixteen commercial banks operating in the United Arab Emirates using panel data for the period of 2013-2019. The secondary data was collected from banks and examined by applying standard descriptive statistics and the random effect model for hypothesis testing. It is concluded from the regression outcomes that non-performing loans ratio and cost-income ratio have a significant negative impact on commercial banks profitability in the United Arab Emirates, while capital adequacy ratio, liquidity ratio, and loans -to-deposits ratio all have a very weak positive relationship on the return on assets but they are not determinants of bank’s profitability due to the insignificant statistical impact on it. It is therefore suggested that to enhance financial performance and minimize the risk of non-performing loans in the future, banks must watch very carefully the loans’ performance and analyze thoroughly the clients’ credit history and ability to pay back their debts prior to any approval of loan applications. Furthermore, banks should continuously improve their assets utilization, liquidity, and techniques of managing operating costs, improve the impact of capital adequacy, and the use of deposits for lending activities from a weak positive impact to a significant positive impact on their profitability. The researchers recommend that future studies on credit risk management influence on banks’ financial performance should consider more independent variables and longer periods of study such as twenty or thirty years to have more accuracy and generalized results.  

CAN RISK MANAGEMENT ADD VALUE?

1995 ◽  
Vol 35 (1) ◽  
pp. 740
Author(s):  
D. C. Shimko
Keyword(s):  
Risk Management ◽  
Capital Structure ◽  
Risk Reduction ◽  
Quantitative Model ◽  
Management Decision ◽  
Imperfect Markets ◽  
Corporate Risk Management ◽  
Structure Program ◽  
Corporate Risk ◽  
The Impact

Proper risk management reduces risk, but does it necessarily add value for corporate shareholders? Modigliani and Miller argued in 1958 that the answer is 'no' in a perfect market setting. How risk management adds value in an imperfect markets setting is shown. In particular, the corporate risk management decision is linked to the leverage decision to measure the impact of risk reduction on shareholder value. A quantitative model is developed and is applied to five public commodity companies to calculate the value increase due to optimal risk management and leverage. Finally, the practical aspects of implementing a joint risk management and capital structure program are discussed.

scholarly journals Effectiveness of Employee Participation in the Capital of their Enterprise: Russian and International Experience

2021 ◽  
Vol 18 (1) ◽  
pp. 48-55
Author(s):  
O. N. Buchinskaya ◽  
Keyword(s):  
Financial Performance ◽  
Positive Impact ◽  
Employee Participation ◽  
Developed Countries ◽  
Employee Ownership ◽  
International Studies ◽  
Public Enterprises ◽  
Research Results ◽  
Collective Ownership ◽  
The Impact

The use of employee participation in the ownership of enterprises has become widely spread since the second half of the twentieth century. Alongside the development of various forms of employee participation in property, there have been ongoing theoretical debates about the effectiveness of these forms, for instance, whether employee property is a reliable method to increase the efficiency of a capitalist enterprise or just an attempt to implement elements of the socialist doctrine. The study aims to analyze the international perspective on employees’ equity participation in property, in particular the focus is made on the world’s most common ESOP plan. The methodological framework is based on international studies discuss-ing the impact of ESOP plans on the economic and financial performance of enterprises. These studies deal with the experience of developed countries as well as developing countries, from China to Cameroon. The positive impact of employee property on increasing the productivity of the enterprise is shown. In terms of financial indicators, the research results are inconsistent. In general, there is a weak positive, mainly indirect impact of partial ownership of employees on the financial performance of their enterprises. Moreover, in developed countries the effectiveness of ESOP is higher than in developing ones.The authors draw conclusion on unsatisfactory state of Russian enterprises with employee ownership which is reflected in steady decline in quantity of Russian public enterprises. The study includes explanation of reduction in the number of public enterprises, and recommendations for their organizational and legal type reform in order to improve the effectiveness in appli-cation of collective ownership in Russian conditions.The research results are used to give recommendations for improvement of the efficiency of shared employee ownership in Russia. It is shown that the concept of collective ownership in Russia should be reconsidered and the new types of employee par-ticipation in enterprise ownership should be based on protected minority corporatization.

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