The Mediating Effect of Top Management Support on the Relationship between Organizational Culture and Enterprise Risk Management Effectiveness among Malaysian Public Listed Companies: A Conceptual Framework

Mohd Ali Hassan ,Ahmad Shukri Yazid

doi:10.7176/rjfa/10-2-11

Abstract

Enterprise Risk Management (ERM) is believed as an effective risk management technique in managing risk within an organization and is fast becoming the best practice standard for an organization primarily for an entity that has high-risk exposure such as banking institutions. The purpose of this study is to develop the base knowledge and empirically test the relationship between organizational culture and ERM effectiveness. Also, an element of top management support also will be studied for determining the mediating effect of top management support on the relationship between organizational culture and ERM effectiveness. The data will be collected using a survey questionnaire and will be addressed to chief risk officers (CROs), chief internal auditors (CIAs) and chief financial officers (CFOs). This study tries to develop a conceptual framework by investigating the mediating effects of top management support on the relationship between organizational culture and ERM effectiveness among Malaysian public listed companies. Organizational culture expected to have direct effects and significantly influence ERM effectiveness. Also, top management support expected to mediates the relationship between organizational culture and ERM effectiveness. Keywords: enterprise risk management, organizational culture, top management support, effectiveness DOI : 10.7176/RJFA/10-2-11

Highlights

Over the last fifteen years, the new risk management technique aimed to improve the traditional technique to risk management was introduced by proposing a holistic system that requires the organization to integrate different units and level within an organization known as enterprise risk management (ERM) (Arena, Arnaboldi, & Azzone, 2010)
This study proposes to test the direct effect of top management support on Enterprise Risk Management (ERM) effectiveness
This study proposed the conceptual framework to test the significant influence of organizational culture on ERM effectiveness and in the same time to identify the mediating effects of top management support between organizational culture and ERM effectiveness

Summary

Introduction

Over the last fifteen years, the new risk management technique aimed to improve the traditional technique to risk management was introduced by proposing a holistic system that requires the organization to integrate different units and level within an organization known as enterprise risk management (ERM) (Arena, Arnaboldi, & Azzone, 2010). In Malaysia, Togok (2016) was conducted studies on ERM effectiveness by exploring the impact of six contingent factors which is involvement, structure, enterprise systems, culture, the tone from the top, and strategic role of ERM champion in influencing ERM effectiveness. Many researchers have already developed several frameworks in this area (e.g., Hartnell, Ou, & Kinicki, 2011; Laforet, 2016; Togok, 2016) These frameworks are not driven by organizational culture and top management support considerations simultaneously. The researcher studies the other factors such as involvement, structure, enterprise systems, and the strategic role of ERM champion in the same framework in testing the effects on ERM effectiveness. In order to measure organizational culture, study done by Togok (2016) has adapts the model proposed by Wallach (1983) called Wallach’s (1983) Model of Organizational Culture whereas this study adopts the Denison Model of Organizational Culture (1990) which focus on four dimensions including involvement, consistency, mission, and adaptability in measuring organizational culture’s dimension

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Methods

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Conclusion