A Literature Review: Effect of Enterprise Risk Management (ERM) Implementation on Micro, Small and Medium Enterprises (MSMEs).

This literature review examines the implementation of Enterprise Risk Management (ERM) frameworks within Small and Medium Enterprises (SMEs), emphasizing the distinctive challenges and advantages for these organizations. SMEs often encounter obstacles such as limited financial resources, informal business processes, and a lack of specialized risk management expertise, which can impede effective risk management. Despite these challenges, the adoption of ERM frameworks can offer significant benefits, including improved risk identification and mitigation, enhanced decision-making capabilities, better resource allocation, and increased stakeholder confidence. The review identifies notable research gaps, including a scarcity of SME-focused studies, a lack of longitudinal research, and insufficient exploration of industry-specific ERM practices. The literature reveals contradictions, particularly concerning the complexity of ERM frameworks like COSO and ISO 31000, underscoring the necessity for simplified and tailored models for SMEs. However, there is a consensus on the critical role of leadership commitment, organizational culture, and the integration of ERM into strategic planning for successful implementation. Practical recommendations for SMEs include fostering a risk-aware culture, securing leadership commitment, and leveraging technology to enhance risk management processes. This review aims to contribute to a deeper understanding of ERM practices in SMEs and offers practical recommendations to enhance their resilience, competitiveness, and long-term success in a dynamic business environment.

PurposeThe 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/approachA 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.FindingsThe 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/implicationsThis 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/valueThere 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.

This study looked into how Enterprise Risk Management (ERM) practices are applied by Micro, Small, and Medium Enterprises (MSMEs) in Cateel, Davao Oriental, and how these practices relate to their business performance. Even though ERM is becoming more important today, many MSMEs especially in smaller towns still struggle with different types of risks. There is also limited local research that explains how ERM affects the performance of small businesses. To address this, the researchers gathered data from 94 MSME owners using a structured questionnaire and analyzed the results through mean, ANOVA, and Pearson correlation. The findings showed that ERM practices were generally high among the respondents, particularly in compliance and operational activities. Business performance was also rated high. Based on ANOVA results, there were no significant differences in both ERM practices and business performance when grouped according to business type or years in operation, which means the Impact of ERM among MSMEs is almost the same regardless of their size or age. Meanwhile, the correlation analysis revealed a moderate to strong relationship between ERM and business performance, suggesting that MSMEs with better ERM practices tend to perform better overall. In conclusion, the study highlights that ERM plays an important role in helping MSMEs become more stable and sustainable. Because of this, the researchers recommend that smaller and newer businesses be given more access to training and support programs that can help them strengthen their risk management practices.

Investigating ERM Adoption and Implementation in Insurance

Purpose This paper aims to identify the influence of business strategy on enterprise risk management (ERM) adoption and organizational performance (OP). In addition, the mediation effect of ERM on the relationship between business strategy and OP is assessed. Design/methodology/approach A cross-sectional analysis of primary data gathered from 174 public listed companies in Malaysian Bourse through survey was conducted. Findings Companies with cost leadership business strategy are more eager to implement ERM compared to companies with differentiation strategy. The results also indicate that ERM implementation has a significant positive impact on OP. Though ERM is a partial mediator of the relationship between cost leadership strategy and OP, it does not mediate the relationship between differentiation strategy and OP. Research limitations/implications One of the limitations of this study was the small number of respondents, comprising only 174 public listed companies. In addition, the manifest variables adopted from previous studies may not be the best indicators to measure latent variables. Nonetheless, this study fills the gaps in ERM studies by determining the impact of different kinds of strategy on ERM adoption and investigating the mediating effect of ERM on the relationship between business strategy and OP. Practical implications Although the trend in Malaysia seems to move toward ERM adoption, evidence shows that it is not widely practiced among Malaysian firms. Directors of Malaysian companies can understand better the impact of enterprise business strategy on the adoption of risk management and how ERM influences OP. The results of this study also provide valuable insights for the corporate governance regulatory authorities. Originality/value This paper is among the few to assess the impact of firm’s strategy on ERM adoption and to determine the mediation effect of ERM on the relationship between business strategy and OP.

The Enterprise Risk Management (ERM) process has heterogeneously developed across the world, although it represents a leading paradigm, supporting organizations to identify, evaluate, and manage risks at the enterprise level. Academics have studied the process, but there is no complete picture of the determinants and implications of such an integrated risk management process. Therefore, we present a systematic empirical literature review on ERM, based on a research protocol. The review highlights that the ERM literature can be divided into four general lines of research: the ERM adoption, the determinants of the ERM implementation, the effects of ERM adoption, and other aspects. In contrast to the richness of studies devoted to ERM engagement in small and medium-sized enterprises (SMEs), studies exploring ERM adoption in banks or insurance are relatively few. The literature review has revealed that the most frequently investigated effect of ERM is on firm performance. Little effort has been dedicated to the analysis of the effectiveness of ERM by its components and to institutional, individual, and organizational factors that affect ERM adoption. The study can serve as a starting point for scholars to explore research gaps related to ERM, while the practitioners can rely on the presented findings to identify the effects of the ERM implementation.

In today’s uncertain business environment, Micro, Small, and Medium Enterprises (MSMEs) play a vital role in economic growth, especially in developing countries like the Philippines. However, their limited access to management tools and resources makes them vulnerable to risks. This study examined the relationship between risk management practices and MSME competency, guided by the COSO Enterprise Risk Management (ERM) Framework (2013). It aimed to: (1) analyze MSME profiles (income, sector, assets, employees, years of operation); (2) assess the usage and effectiveness of risk management practices; (3) identify differences and relationships across business profiles; and (4) propose a practical risk management action plan. Findings showed that most MSMEs earn Php 9,000–35,000 monthly, have assets below Php 3 million, employ fewer than 10 workers, and operate mainly in wholesale/retail trade. Despite resource constraints, risk management—particularly in compliance, financial, and strategic areas—was rated “highly effective.” Significant differences emerged by income, assets, and years in operation, while correlation analysis revealed a strong positive link (r = 0.6102) between risk management effectiveness and overall competency. The study proposed a development plan including seminars on sustainable risk strategies, simplified loan processes, and digital promotion tools to strengthen MSME resilience and long-term sustainability. The research supports the UN Sustainable Development Goals (SDGs): SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), SDG 11 (Sustainable Cities and Communities), and SDG 17 (Partnerships). Overall, it highlights the transformative role of integrated risk management in enhancing MSME performance, resilience, and competitiveness.

The Impact of Enterprise Risk Management on Capital Allocation in Insurance Companies

This paper examines the influential factors of potential adoption of Enterprise Risk Management (ERM) and the impact of ERM adoption on the public listed banking firms’ performances in Indonesia during 2009 to 2017. This research uses logistic regression to test four potential factors as the driving forces behind the potential adoption of ERM and linear regression to test the impact of ERM on firms’ performances. The result suggests that firms with greater size, having more institutional ownership, and being part of Multinational companies are more likely to adopt ERM, while the implementation of ERM has no significant impact on the firms’ performance. Little empirical research has been conducted on the topic, especially in developing economies like Indonesia. This study will broaden the scope of literature by providing novel empirical evidence.

This paper aims to investigate the extent to which Malaysian small- and medium-sized enterprises (SMEs) practised enterprise risk management (ERM) framework and their effects on sales performance. The components of ERM examined includes: risk appetite, control environment, assessing the risk management framework and control activities. The paper is based on a questionnaire survey study among 214 SMEs that consist of 77.6% (166) from services related enterprises; and 22.4% (48) of manufacturing related enterprises. The data analysis indicates that 80% of the respondents are clear about the importance of risk management to achieve organisational long term sustainability; the senior management is committed to cultivate good culture and have policies to support ERM. More than 20% of the respondents failed to appoint an independent director to chair risk management committee and to obtain external stakeholders’ view when developing risk appetite. Regression analysis also indicates that control environment has a significant and positive impact on sales. Hence, it is important for SMEs to establish a structured system of internal control, to appoint oversight functions and independent assurance providers to manage risks. Risk management is vital in SMEs to reduce exposure to business loss. It is recommended that standards and professional bodies need to develop ERM principles applicable to SMEs. This principle should balance between preferences, requirements and resources within SMEs. This paper contributes to the empirical literatures on the extent ofERM practices and their effects on SMEs’ sales in emerging markets. Keywords: enterprise risk management, small and medium-sized enterprises, emerging markets, Malaysia

PurposeThis paper aims to investigate various institutional pressures driving the adoption and implementation of a new risk management system; enterprise risk management (ERM).Design/methodology/approachThe implementation of ERM-related practices is analysed based on an institutional framework and drawing on empirical evidence from multiple sources in ten large/medium-sized insurance companies. This paper focuses on extra-organisational pressures exerted by political, social and economic institutions on insurance companies which drove the adoption decision.FindingsIt was found that different change agents have taken part in the decision to introduce new risk management system as a part of ERM implementation process. Further, the institutional pressures, coercive, mimetic and normative, were found to differ in character and strength over different intervals of time in relation to the adoption of ERM. Companies that adopted ERM early were mostly driven by internal strategic drivers, whereas the recent adoption decision was more driven by coercive and mimetic pressures. Thus, evidence of divergence between insurance companies was found.Research limitations/implicationsThe findings have implications for policy makers, regulatory agencies and innovation developers. ERM was considered not only as a necessity but also as a value added to the insurance companies under study. Thus, regulators and innovation developers should survey main players in any specific organisational field to understand their views before issuing new compulsory regulations or developing innovations. They also need to consider exploring companies’ experiences with ERM, which can provide a basis for the development of strengthened and more informative regulatory ERM frameworks. This will support a faster and easier understanding and implementation of ERM framework hindered by the confusions companies may face when considering the complicated/changing regulatory and risk requirements.Originality/valueThis study extends the scope of institutional analysis to the risk management field, particularly ERM and to the explanation of how different institutions affect the decision to move towards ERM and modify the risk management rules applied within the organisational environment. It looks not only at convergences but also divergences associated with the period of time when ERM adoption decision was made. Thus, it develops a processual view of change.

This study examined the implementation of Enterprise Risk Management (ERM) on firm performance of Public Listed Companies (PLCs) on main market in Bursa Malaysia based on COSO (2004) ERM Integrated Framework. In addition, this study also investigated the moderating role of Board of Directors’ (BODs) monitoring, firm complexity and firm size of the implementation of ERM on firm performance. Questionnaire survey was adopted as the research methodology for this study. Total of 103 questionnaires were successfully collected through mail questionnaire from PLCs. The data was analyzed by using Partial Least Squares and Structural Equation Modeling Tool (Smart-PLS 2.0 M3). Based on the analysis, implementation of ERM was found to have significant influence on firm performance. In addition, monitoring by BODs, firm size and firm complexity were found to significantly influence the relationship between ERM implementation to firm performance. The findings from this study enable organizations to better understand the status of their ERM implementation and assist them in identifying areas of improvement with regards to the processes within each ERM elements. It also contributes to the literature on the importance of good governance within ERM framework in organizations.

This paper responds to the lack of empirical evidence on how enterprise risk management (ERM) and the financial performance of small and medium-sized enterprises (SMEs) are related. Structural equation modeling is used to explore new mediators in the relationship between ERM and SME financial performance. The results show that organizational culture (mission dimension) and strategic risk management performance are full and positive mediators between ERM and financial performance. These research results highlight the fact that the implementation of ERM in an enterprise does not by itself generate the expected effects without the existence of a mature organizational culture and the monitoring of strategic risk management performance. These findings are particularly relevant for SMEs with “pretend ERM” that lacks the strategic and operational components. ERM also helps to transform the negative effect of foreign capital in SME equity on financial performance into a positive effect.

Enterprise risk management (ERM) has emerged a significant change starting from the way firms manage their complex portfolio of risks. Particularly, the insurance companies that use ERM have shown propensity of success during their daily operation and have been capable to diminish the collective risk of their output. This study draws attention to the performance, firm value and capital allocation effects of ERM adoption in emerging economies using the case of non- life insurance companies in Albania. The objective of the paper is to examine the effects trigged by ERM implementation on their firm value and the factors that caused it based on a structural and institutional theoretical framework. The sample is the population itself including all the non-life insurance companies which have implemented ERM from 2015 and on.
 The methodology includes explanatory field study through semi-structured interviews with the key actors of risk management departments of these companies. This study distinguishes the impact of institutional and managerial pressures in adapting ERM in non-life insurance companies, based on empirical evidence and field study. The aim is to contribute in a better understanding of all the forces driving ERM adoption and implementation and the change in risk management practices and capital allocation within non-life insurance companies in Albania.
 The findings identify the nature of internal and external factors which can be useful in creating new policies in relation of improving risk management systems and corporate governance.

This study employs a mixed method approach to explore the determinants of enterprise risk management (ERM) implementation in China. First, the findings provides a theory-driven and evidence-based perspective as to what factors are deemed to be critical in ERM implementation. Second, this study provides a comprehensive understanding of the effect of organizational capabilities on ERM implementation through investigating the relationships between organizational ambidexterity, organizational resilience and ERM. In addition, the findings in this thesis provides strong managerial implications for enterprises and ERM policymakers to better develop their ERM framework or program.