scholarly journals ENTERPRISE RISK MANAGEMENT PRACTICES AND ITS IMPACT ON FIRM PERFORMANCE: EVIDENCE FROM SRI LANKAN INSURANCE INDUSTRY

2020 ◽  
Vol 6 (12) ◽  
pp. 11-21
Author(s):  
Kingsley Karunaratne Alawattegama
Keyword(s):  
Risk Management ◽  
Firm Performance ◽  
Positive Relationship ◽  
Management Practices ◽  
Negative Relationship ◽  
Enterprise Risk Management ◽  
Insurance Companies ◽  
Return On Equity ◽  
Corporate Managers ◽  
Enterprise Risk

Enterprise risk management (ERM) has gained an increased attention among the corporate managers in the recent past as a strategic approach to managing risk. This study empirically verifies whether the adoption of ERM has an impact on firm performance and uses both primary and the secondary data relating to the insurance companies listed on the Colombo Stock Exchange. Return on equity (ROE) is used as a proxy to measure the firm performance and multivariate regression analysis is used to analyze data. The findings of this study suggest that there is a weak positive relationship between the adoption of ERM practice and the return on equity. Out of the eight ERM functions assessed, only ‘event identification’ and ‘control activities’ show a weak positive relationship with ROE. Other ERM functions indicate that there is a weak negative relationship with ROE. The findings of this study contradict with some scholars who find there is a significant positive relationship between adoption of ERM and firm performance. Owing to the contradictory nature of the findings, this study induces corporate managers to pay a close attention to the cost-benefits analysis when designing and implementing ERM system and not to heavily invest and extensively relied upon ERM as a vehicle for creating long-term shareholder value.

scholarly journals Enterprise Risk Management and Firm Performance: A Financial Sector Analysis of Pakistan

2021 ◽  
pp. 1302-1318
Author(s):  
Muhammad Jawad ◽  
Munazza Naz ◽  
Nauman Waheed ◽  
Sohail Rizan ◽  
Muhammad Aftab Shamsi
Keyword(s):  
Risk Management ◽  
Firm Performance ◽  
Enterprise Risk Management ◽  
Return On Equity ◽  
Enterprise Value ◽  
Financial Firms ◽  
Enterprise Risk ◽  
Asset Value ◽  
Return On Capital ◽  
Income Ratio

Enterprise faces many kinds of risks and therefore the attention differs across institutions and organizations. Risk as an event that will influence the performance of a corporation as well as environmental risks, moral problems and social problems. Furthermore, risk or uncertainty as a broad and well-organized structure for managing different kinds of risks like credit, operational, marketplace, operative, economical or capital risks and risk transmission to maximize organization worth. The research analysis the different performance indicator of firm, enterprise risk management and their effect on firm performance. The secondary data on Commercial Banks, Foreign Banks, Investment Banks, Insurance Companies, Development Finance Institutions (DFIs), Leasing Companies, Mutual Funds, Modaraba Companies and Housing Finance Companies are collected from Financial Statement Analysis (FSA) from 2008 to 2016 provided by Statistics and DWH Department of State Bank, Pakistan. This study used Debt to Asset Ratio (DTA) as dependent variable and dummy of firm performance while Cost to Income Ratio (CTI), Enterprise Risk Management (ERM), Equity to Asset Ratio (ETA), Enterprise Value to Asset Value (EVTAV), Leverage (LVG), Return on Capital Employed (ROCE) and Return on Equity (ROE) are used as independent variables. The research found long run relationship among the variables. OLS Regression Test that Enterprise Risk Management (ERM) implementation, Equity to Asset Ratio (ETA), Enterprise Value to Asset Value (EVTAV), Leverage (LVG), Return on Capital Employed (ROCE), Return on Equity (ROE) have significant effect on performance of financial firms in positive direction while Cost to Income Ratio (CTI) have insignificant impact on performance of financial firms.

scholarly journals Towards Managing Firm Performance through Enterprise Risk Management Practices and Staff Competence: An Empirical Study from the Banking Sector

2021 ◽  
Vol 3 (3) ◽  
pp. 32-45
Author(s):  
Habil Slade Ogalo
Keyword(s):  
Risk Management ◽  
Firm Performance ◽  
Knowledge Sharing ◽  
Management Practices ◽  
Banking Sector ◽  
Enterprise Risk Management ◽  
Enterprise Risk ◽  
Risk Culture ◽  
The Relationship ◽  
Risk Knowledge

This study was aimed to measure the impact of enterprise risk management practices on firm performance following the moderation of staff competence. The present study proposed five hypotheses, three direct and two moderating. For measuring hypotheses and objectives, the current research targeted bank officers in the Kingdom of Bahrain's banking sector. A total final sample of 349 was used in primary analyses selected through simple random sampling. Current research shows significant positive effects of risk culture and risk knowledge sharing on the firm`s (financial and non-financial) performance of banks in the Kingdom of Bahrain. Similarly, the first moderation strengthens the relationship between risk knowledge sharing and firm performance through staff competence. In addition, the second moderation hypothesis does not strengthen the relationship between risk culture and firm performance with the moderating effect of staff competence. The current research findings are supported under the resource-based view with several theoretical and practical implications for researchers and industry practitioners.

scholarly journals The Factors Influencing the Enterprise Risk Management Practices and Firm Performance in Jordan and Malaysia

2020 ◽  
Vol 8 (5) ◽  
pp. 687-702
Keyword(s):  
Risk Management ◽  
Firm Performance ◽  
Middle East ◽  
Influencing Factors ◽  
Management Practices ◽  
Enterprise Risk Management ◽  
Management Approach ◽  
Factors Influencing ◽  
Enterprise Risk ◽  
Comparative Review

Future of uncertainty and risks in firm businesses and country-based economics remains continuous processes that need to be managed effectively and efficiently. Risks taking is a routine activity in all firms. Enterprise Risk Management (ERM) has now become an ultimate concern and a robust risk management approach in all financial and non-financial industries and other sectors throughout the globe. Firms are adopting ERM as a holistic strategy by putting its core components in practice to effectively manage all risks to protect the organizations and stakeholder value. The process of putting ERM into practice is only effective and efficient through identifying the factors that influence its practice in order to improve the firm performance. As a result of this reason, various factors influencing ERM were examined by different investigators as an indirect factor or as a parameter. However, only a few scholars studied it as a major factor or main objective, despite the risks remain a major issue influencing the goals of enterprises in all firm types in both Jordan and Malaysia. In order to fully consolidate the influencing factors on ERM practices, a comparative review of the available literature in Jordan and Malaysia were carried out to excavate the key influencing factors for direct identification in order to improve the firm performance. The factors identified were categorized into three groups; the management-based, firm-based, and ERMperformance-measurement-based factors. Each group of factors was found to influence the success of ERM strategies and practices in both Jordan and Malaysia. Jordan (Middle-East) and Malaysia (South-East Asia) shared a common characteristic of ERM adoptions and practices with regard to firm composition and risk management. Both countries are now pacing up to meet up with ERM practice challenges. Although, ERM still is a relatively new concept in several parts of Middle-East and SouthEast Asia. Though, Malaysia proved to have more improved and established ERM success factors and researches as compared to Jordan. Additionally, Malaysia was found to have more appeared ERM terms in the Board of Bursa Malaysia (BBM) Guidelines as well as ERM practices under different sectors from 2008 to 2018 compared to Jordanian Amman Stock Exchange (ASE). Thus, it appears that Malaysia has more robust ERM research works, adoptions, practices, and compliance system in place compared to what is obtainable in Jordan. In conclusion, firm managers in Jordan and Malaysia are highly recommended to use these ERM factors identified as strategic and to improve ERM practices in their organizations

Effect of Enterprise Risk Management on Firm Value: Empirical Evidence from Non-Financial Firms in Pakistan

GIS Business ◽  
1970 ◽  
Vol 13 (2) ◽  
pp. 15-28
Author(s):  
Nouman Nasir
Keyword(s):  
Risk Management ◽  
Firm Value ◽  
Positive Impact ◽  
Stock Exchange ◽  
Enterprise Risk Management ◽  
Least Square ◽  
Return On Equity ◽  
Financial Firms ◽  
Enterprise Risk ◽  
Ordinary Least Square Regression

This research examines the effect of enterprise risk management on firm value in Pakistan. Further, this study empirically examines company characteristics that establish the execution of an enterprise risk management system. Using a sample of final dataset of 83 non-financial firms located in Pakistan. The sample included non-financial firms from the year 1999 to 2015 and so up to seventeen observation years per company. As in context of Pakistan, most of the organizations are already implement an ERM programs and establish specialized ERM departments because the ERM is now a global term and has become increasingly relevant because of the growing difficulty of risk and an additional development of regulatory frame works. For the empirical evidences, data collected from non-financial firms listed at the Pakistan Stock Exchange (PSX). Results of logistic regression shows that Capital Opacity, Profitability, Financial Leverage, Firm Size and Slack have positive impact on the implementation of an ERM system but Industrial diversification, Industry and Return on Equity are negatively related to an ERM engagement. The results of ordinary least square regression finds positive relationship between use of an ERM and firm value.

scholarly journals The Effect of Enterprise Risk Management (ERM) on Firm Performance: Evidence from the Diversified Industry of Sri Lanka

2018 ◽  
Vol 10 (1) ◽  
pp. 75
Author(s):  
Kingsley Karunaratne Alawattegama
Keyword(s):  
Firm Performance ◽  
Sri Lanka ◽  
Empirical Evidence ◽  
Negative Impact ◽  
Positive Impact ◽  
Enterprise Risk Management ◽  
Performance Information ◽  
Return On Equity ◽  
Enterprise Risk ◽  
And Control

The objective of this empirical study is to explore the effect of the adoption of ERM on the performance of the diversified industry of Sri Lanka. The extent of the adoption of ERM is assessed based on eight ERM functions recognized by the ERM integrated framework of the committee of sponsoring organization of the Treadway Commission and use return on equity as a proxy to measure firm performance. This study finds ERM supportive internal environment, risk-aligned objective setting, event identifications, and risk response have a positive impact on firm performance. However, none of those impacts were statistically significant. Surprisingly, empirical evidence reveals that risk assessment and control activities have a negative impact on the firm performance. Information & communication and monitoring functions indicate a significant impact on firm performance. Nevertheless, monitoring function shows a negative impact on the firm performance. The researcher believes this negative impact is attributable to the increased cost of monitoring activities that is crucial for a diversified business setup. This empirical evidence induces the researcher to conclude that, except for communication and monitoring, the adoption of ERM has no significant impact on the firm performance. These findings are contradictory with the findings of prior researchers.

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.

scholarly journals Evaluation of the Level of Enterprise Risk Management Adoption and Maturity of Insurance Companies in Kenya

2017 ◽  
Vol 1 (2) ◽  
pp. 1
Author(s):  
Caroline Njagi ◽  
Dr. Amos Njuguna
Keyword(s):  
Risk Management ◽  
Risk Tolerance ◽  
Enterprise Risk Management ◽  
Strategic Decision ◽  
Insurance Companies ◽  
Top Management ◽  
Organizational Strategies ◽  
Risk Management Framework ◽  
Enterprise Risk ◽  
Risk Appetite

Purpose: The purpose of this study was to evaluate the extent to which insurance companies in Kenya have adopted ERM process, and then to assess the maturity, challenges and strategies in the implementation of this process.Materials and methods: The research design adopted for the study is descriptive research. The researcher conducted a survey on the 49 insurance companies of Kenya to encapsulate the factors that are relevant in articulating the extent of adoption of ERM and the level of maturity. A sample of 196 respondents was selected from a population of 245 respondents. The study used quantitative and qualitative methods of data analysis. Statistical Package for Social Sciences (SPSS) version 20 program was used for analysis. The results were presented using tables and pie charts. Similarly, qualitative data was summarized and categorized according to common themes and presentedin continuous prose form.Results: The study concluded that organizational related challenges hindered implementation of ERM programs. Results revealed that inadequate application of the risk management framework, ambiguity in roles and responsibilities in risk management, complexities in risk measurement, lack of embodiment of ERM in organizational culture, difficulty in risk quantification, linking risk information to strategic decision making, ensuring that all decisions remain within the organization’s risk tolerance, proactively identifying current and emerging risks, cost and budgetary constraints, misalignment of the risk and business operating models, risk management not seen as a priority by top management and inadequate information to make risk-based decisions hindered implementation of ERM frameworks among insurance firms in Kenya. The findings imply that organization related challenges have a significant effect on ERM implementation.Recommendations: The study recommends that there should be better organizational strategies to help improve implementation of ERM programs. It was found that building a strong risk culture, engaging consultants, building a dedicated ERM function, committed board of directors and top management, developing risk appetite statement, appointment of a Chief Risk Officer (CRO) and availing ERM budgets improved the implementation of ERM programs. Key words: enterprise risk management, adoption, maturity

scholarly journals The association between strategic cost management and enterprise risk management: A critical literature review

2011 ◽  
Vol 9 (1) ◽  
pp. 184-195
Author(s):  
Mohamed Elsayed ◽  
Ananda Wickramainghe ◽  
Marwa Abdel Razik
Keyword(s):  
Risk Management ◽  
Value Chain ◽  
Positive Relationship ◽  
Cost Management ◽  
Enterprise Risk Management ◽  
Value Chain Analysis ◽  
Total Quality ◽  
Strategic Cost Management ◽  
Chain Analysis ◽  
Enterprise Risk

Reviewing literature and application of strategic cost management (SCM) and enterprise risk management (ERM) are critical and significant for corporate management to facilitate top management to employ appropriate SCM and ERM processes and systems especially in occurrence of constant and regular business turn around, crises and turbulence in recent time in world of business. This paper revisits and reviews the association between strategic cost management and enterprise risk management. Based on this review, the following propositions were developed; firm, which adopted SCM, is more likely to adopt ERM approach, there is a positive relationship between audit type and the association between ERM and SCM, and there is a positive relationship between company size and the association between ERM and SCM. The association between ERM and SCM differs from industry to another. The study also develops a framework for SCM composes of the following items: SWOT analysis, benchmarking, competitive advantage, value chain analysis, implement strategy that reduce cost during the value chain analysis by using target costing, accounting based-costing, accounting based-management, just in time, total quality management, life cycle, theory of constraints, and measure performance by using balanced scorecard.

Sign in / Sign up

Export Citation Format

Share Document