scholarly journals The Role of Risk Culture in Enterprise Risk Management Implementation

2020 ◽  
Vol 15 (11) ◽  
pp. 13
Author(s):  
Mohamed Santigie Kanu
Keyword(s):  
Risk Management ◽  
Organizational Performance ◽  
Empirical Evidence ◽  
Business Environment ◽  
Enterprise Risk Management ◽  
Study Objective ◽  
Enterprise Risk ◽  
Risk Appetite ◽  
Study Results ◽  
Risk Culture

Enterprise Risk Management (ERM) and risk culture academics and practitioners have argued that they are inherently related without empirical evidence. They continue to advocate for their implementation by firms to face the dynamic business environment with certainty. The lack of empirical evidence to underpin this relationship partly contributes to their fragmented implementation and the lack of proper attention to risk culture in ERM implementation. The challenge in measuring these two abstract concepts contributes to their dichotomous measures in the literature, with most studies concentrated in the developed economies. The study objective is to provide a comprehensive measurement of the two constructs and empirically determine their relationship in the less-researched context of Africa. The study results empirically confirm risk culture and ERM to have a significant positive relationship. A firm's size and financial leverage were found to be significant determinants for ERM implementation, whereas capital opacity, financial slack, and board composition are not. Organizational leaders are advised by the study not to treat risk culture and ERM as substitutes but as complements. A sound risk culture provides a solid base for ERM implementation. Risk culture should be managed and developed in full alignment with the risk appetite and the ERM framework to improve organizational performance. These shall enable the promotion of a risk-aware culture and ingraining risk-related measures into performance management that help drive the organization forward. The constructs measures presented in the study can be used by academics and risk practitioners to determine the level of risk culture and ERM implementation in organizations.

scholarly journals A Theoretical Framework for Enterprise Risk Management and Organizational Performance

2021 ◽  
Vol 14 (5) ◽  
pp. 63
Author(s):  
Mohamed Santigie Kanu
Keyword(s):  
Risk Management ◽  
Strategic Planning ◽  
Organizational Performance ◽  
Business Environment ◽  
Enterprise Risk Management ◽  
Empirical Literature ◽  
Equation Modeling ◽  
Academic Literature ◽  
Enterprise Risk ◽  
Risk Culture

The implementation of holistic risk management, enterprise risk management (ERM), is believed to contribute significantly to the successful performance of modern-day organizations that operate in an increasingly volatile and dynamic environment. In an environment of scarce resources and information uncertainty, ERM, risk culture, and strategic planning is required to face an unstable business environment to achieve organizational goals. Several conceptual and empirical studies have provided mixed evidence on the value relevance of ERM. Scholars have also demonstrated that the effects of ERM on performance are contingent upon certain contextual variables. Currently, the academic literature is silent on the joint relationship of ERM, risk culture, strategic planning, and organizational performance. The purpose of this study is to uncover this research gap by analytically reviewing pertinent conceptual and empirical literature to establish the possibility that the impact of ERM on organizational performance is transmitted through risk culture and strategic planning. This paper advances these evolving suggestions, which hinges on the conclusion that the direct effect of ERM on organizational performance is debatable and hence inconclusive due to the possible mediating influence of risk culture and strategic planning. A framework is conceptualized to examine the mediating effects of these two constructs on the relationship. The study proposes partial least squares structural equation modeling for statistical analysis using the unexplored multiple mediation analysis in the ERM academic literature. This paper’s postulations would guide empirical research in various contexts to address the knowledge gaps in the extant literature.

Adoption of enterprise risk management (ERM) in small and medium-sized enterprises: evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Consilz Tan ◽  
Su Zy Lee
Keyword(s):  
Risk Management ◽  
Best Practices ◽  
Business Environment ◽  
Risk Tolerance ◽  
Enterprise Risk Management ◽  
Risk Governance ◽  
Success Factor ◽  
Content Type ◽  
Enterprise Risk ◽  
Risk Appetite

Purpose The critical success factor of enterprises is the ability to identify risks and subsequently adapt to the ever-changing technology, as well as the business environment. This paper aims to investigate the top risks faced by small and medium-sized enterprises (SMEs). In the meantime, this paper outlines the perspectives on enterprise risk management (ERM)-based best practices and the adoption level of ERM practices in SMEs. Design/methodology/approach A mixed methodology was used to collect a comprehensive understanding of the adoption of ERM, especially in SMEs. The research is based on cross-sectional questionnaires and collected from risk practitioners in Malaysia. Detailed analysis of the top risks and best practices presented in this paper to identify the developments of risk management in changing organizations. This study used chi-square tests to examine the distribution of the adoption of the ERM programme using risk and insurance management society risk maturity model attributes. Logit regression was used to test the association of ERM efforts with the probability of adopting/considering ERM practices. Findings The findings indicated that business interruption risk and economic slowdown risk are the major concern for companies in Malaysia. A business continuity plan was found to be the most common risk management practice. Efforts such as the establishment of a risk management team and the development of risk appetite and/or risk tolerance statements in an organization are associated with the probability of adopting/considering ERM practices. Research limitations/implications This paper helps to identify challenges of implementing risk governance and management in SMEs that shed light on the regulatory setting which we rather know a little about its impacts. Originality/value There are limited studies conducted in emerging countries on ERM and the application of the ERM framework in SMEs. Prior research studies are mostly generalized and lack details of risk management strategies applying to specific risks. This paper successfully examined the low maturity level of ERM practices and how SMEs in Malaysia managed those risks that emerged in their organizations.

scholarly journals Enterprise Risk Management and Risk Culture in Construction Public Listed Companies

2021 ◽  
Vol 26 (2) ◽  
pp. 17-36
Author(s):  
Ching Ching Wong ◽  
Faizul Azli Mohd Rahim ◽  
Siaw Chuing Loo
Keyword(s):  
Risk Management ◽  
Listed Companies ◽  
Two Dimensions ◽  
Enterprise Risk Management ◽  
Annual Reports ◽  
Top Management ◽  
Risk Manager ◽  
Enterprise Risk ◽  
Risk Appetite ◽  
Risk Culture

Inadequate risk management and lack of risk culture can expose a company to unexpected risk events, which can negatively affect its performance. However, there are inconsistencies in suitable dimensions to measure the enterprise risk management (ERM) construct, as well as insufficient embedding strategies for risk culture. This study aims to identify the ERM practices and risk culture dimensions among the Malaysian construction public listed companies (PLCs). The roles of top management and chief risk officer/risk manager in influencing ERM and risk culture are also explored. A total of 46 annual reports and 10 interviews of industry practitioners were analysed using content analysis. The analysis of the annual reports found that risk policy and risk appetite/tolerance, monitoring key risk and accountability are the three dimensions of risk culture. In addition, based on the interviews, reward and recognition and internal relationships were identified as the two dimensions of risk. Top management and risk manager were found to be the primary drivers of ERM programme and risk culture in construction PLCs. The results of this study are used to formulate a survey instrument for the subsequent data collection to test the proposed theoretical model.

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

Management accounting systems, enterprise risk management and organizational performance in financial institutions

2014 ◽  
Vol 22 (2) ◽  
pp. 128-144 ◽  
Author(s):  
Siti Zaleha Abdul Rasid ◽  
Che Ruhana Isa ◽  
Wan Khairuzzaman Wan Ismail
Keyword(s):  
Risk Management ◽  
Organizational Performance ◽  
Financial Institutions ◽  
Management Accounting ◽  
Enterprise Risk Management ◽  
Accounting Systems ◽  
Content Type ◽  
Management Accounting Systems ◽  
Enterprise Risk ◽  
And Control

Purpose – The purpose of this paper is to examine the linkages between management accounting systems (MAS), enterprise risk management (ERM) and organizational performance by examining MAS information characteristics that match ERM implementation and joint effects of MAS and ERM on organizational performance. Design/methodology/approach – The research method involved administering a questionnaire to 106 financial institutions (FIs) in Malaysia. The respondents were chief financial officers or staff members holding the most senior positions in the finance department of the institutions. Findings – The significant findings on the association between ERM and MAS show that implementation of ERM requires the use of sophisticated MAS information. ERM and MAS complement each other as both are integral to decision making, planning and control in an organization. The finding also substantiates the important role of ERM in enhancing non-financial performance. Research limitations/implications – This study covered only MAS as part of sub-control systems in an organization. Future studies could investigate the link between a more comprehensive management accounting and control system and ERM. Furthermore, this study used perceptual measures of MAS, ERM and organizational performance. Practical implications – The regulating body should promote best management practices of sophisticated MAS and ERM among FIs as these practices will create competitive advantage as well as help those institutions comply with regulations. Originality/value – This study has contributed to the body of knowledge on the linkages between MAS, risk management system and organizational performance.

Integration Stages of Project Risk Management (PRM) into Enterprise Risk Management (ERM)

2019 ◽  
Vol 8 (1) ◽  
pp. 13-33
Author(s):  
Ruchi Agarwal ◽  
Lev Virine
Keyword(s):  
Risk Management ◽  
Functional Organization ◽  
Team Building ◽  
Integrated Approach ◽  
Enterprise Risk Management ◽  
System Thinking ◽  
Enterprise Risk ◽  
Risk Culture ◽  
The Difference ◽  
Integration Improvement

Enterprise risk management (ERM) is a relatively new concept for a project-based organization than for a functional organization. A project-based organization, in general, faces several difficulties in the implementation of ERM due to the diversity of risk associated with several projects. From a system thinking perspective, a project-based organization needs an integrated approach to interrelate the isolated processes of diverse projects. The issues are related to fuzzy picture of integration, such as, the difference between ERM and PRM processes, how to integrate the two concepts, what happens if integration process goes wrong, as well as issues with risk technologies and change in risk culture. The article provides informal and formal approaches to integration of ERM and PRM. Successful integration requires not only an understanding the value of integration, improvement in risk culture, but needs a learning-based approach to improve risk expertise, interaction, team building, and decision making.

scholarly journals Risk Management Support and Organizational Performance: The Role of Enterprise Risk Management as Mediator

2017 ◽  
Vol 2 (2) ◽  
pp. 43
Author(s):  
Azreen Roslan ◽  
Nur Diyana Yusoff ◽  
Hayati Mohd Dahan
Keyword(s):  
Risk Management ◽  
Organizational Performance ◽  
Best Practice ◽  
Enterprise Risk Management ◽  
Senior Management ◽  
Mediating Effect ◽  
Management Support ◽  
Enterprise Risk ◽  
Economic Reality

Risk is inherent in all parts of the organization and if it is not efficiently managed by the senior management it will affect the confidence and expectations of the stakeholders. Enterprise Risk Management (ERM) is said as a best practice technique to evaluate and manage all these risks in this new economic reality. Therefore, organizations practicing ERM are more prepared in managing the feasible threats. In fact, there is a general consensus by scholars and researchers that organizations practicing ERM will improve the organizational performance. However, empirical evidence regarding this matter is still considered scarce. As such, the purpose of this paper is to investigate the mediating effect of ERM on risk management support and organizational performance among public listed companies.

scholarly journals The role of enterprise risk management on disclosure transparency in the international financial reporting standards period

Accounting ◽  
2021 ◽  
Vol 7 (6) ◽  
pp. 1241-1250 ◽  
Author(s):  
Bisan Almasri
Keyword(s):  
Risk Management ◽  
Financial Reporting ◽  
Enterprise Risk Management ◽  
International Financial Reporting Standards ◽  
Future Research ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Enterprise Risk ◽  
Study Results

This research empirically investigates the role of the enterprise risk management system implementation level in capturing firm managerial incentives. The system plays an important role in understanding the association between international financial reporting standards and the capital market. Listed firms in the Australian market were used for the period 2000-2010 for this purpose. The study results imply that implementing higher levels of ERM by Australian firms during the mandatory IFRS adoption period does not capture firm incentives in IFRS period. Consequently, these results suggest that the implementation of ERM by Australian firms does not reduce the contractual costs between investors and management, whilst adopting IFRS does. Future research may use other techniques and/or strategies other than ERM, to capture the firm incentives, and as a result, may have economic consequences.

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