Enterprise Risk Management Implementation Research Articles

Determinants and Value of Enterprise Risk Management: Empirical Evidence From the Literature

AbstractThe development of an enterprise risk management (ERM) program enables companies to manage corporate risks in a holistic manner as opposed to the silo‐based perspective in traditional risk management frameworks. One main question in this regard is what factors drive the implementation of an ERM system in companies and whether ERM programs can actually create value once implemented. This article addresses these questions by conducting a comparative assessment of empirical evidence from the literature regarding the determinants of ERM and its value once implemented. In doing so we are able to illustrate differences in model specifications and the underlying data. Our literature study shows that particularly the company size and the level of institutional ownership are significantly positively related to the implementation of ERM in most empirical studies and, furthermore, that ERM generally has a (significant) positive impact on corporate value and performance (to a different extent and depending on the focus of the studies). However, geographic and/or industrial restrictions regarding the underlying data sets partly limit the generalization of the empirical results.

New Paradigm of Managing Risks: Risk and Control Self-assessment

The implementation of enterprise risk management (ERM) has beenwidely discussed among contemporary corporate boards and executives. Within the ERM framework, an entity is expected to make a paradigm shift of managing its risk, from that of silo or partial to a more integrative approach where all employees are involved in the process. At the core of this ERM implementation is the utilization of Control Self-Assessment (CSA) both as a process and a method to engage management and employees in identifying, analysing and mitigating risks.

Determinants Influencing the Implementation of Enterprise Risk Management in the Nigerian Banking Sector

Enterprise risk management (ERM) is an organized, dependable and reproducible process across the entire system for identifying, measuring, controlling and reporting of opportunities and threats that could impact on the objectives of the organization. The purpose of this study is to empirically examine the extent of ERM implementation in the Nigerian banking sector and the identification of antecedents influencing the adoption. 722 questionnaires were administered to top, middle and lower level managers across 361branches and the headquarters of the respective 21banks. The respondents consist of the staff of the risk management, internal audit and operational departments at both the headquarters and branches of the banks. Both SPSS Software and logistic regression model were used for data analysis. The finding reveals that there is plausible evidence that there is an ERM complete in place in most of the banks while insignificant number indicated ERM partial in place. Furthermore, the finding also indicates that internal audit effectiveness, human resource competency, Regulatory influence and top management commitment were statistically positively significant to the stage of ERM implementation while board characteristic was negatively significant. However, most of the banks had already gone through the ERM process before the CBN mandate. This study provides a new knowledge of the literature on the antecedents of ERM adoption. Similarly, the finding has a policy implication for the board of directors to improve their oversight functions and the regulatory authorities entrench risk based supervision on all policy issues. Future research is therefore, advocated on the effectiveness and impact of ERM systems after implementation using different variables and using board members and top management as respondents.

Enterprise Risk Management (ERM) Implementation: Some Empirical Evidence from Large Australian Companies

According to Economist Intelligence Unit (Economist Intelligence Unit Limited and SAS, 2008), risk management failure is one of the major triggers of the recent global financial crisis. Enterprise risk management (ERM), an organisation wide process which identifies potential adverse events and provides strategies to manage risks, has been suggested as an approach to combat the volume and complexities of the risks faced by today's organisations (see, for example, Beasley et al., 2009). Despite of the recent emphasis given to risk management by the Australian Securities Exchange (ASX), there is scant empirical evidence on ERM implementation among the Australian listed companies. This study aims to provide some evidence on the extent of ERM implementation among the Top 300 companies listed on ASX. Questionnaires were used to collect data for this study. The outcomes of the study show that the majority of the firms involved in the survey not only extensively implement ERM but also extensively embed ERM into their corporate strategic processes. Further, they have also implemented the system for more than five years. Potential limitation of these findings are acknowledged.

Enterprise Risk Management Practices among Malaysian Firms

Enterprise Risk Management (ERM) is fast becoming a fundamental concern in all industries. ERM is a holistic approach for managers to identify risks and select appropriate responses in line with enterprise's risk appetite. This study aims to identify the level of ERM implementation among firms in different industries in Malaysia. Data were gathered from 199 firms listed on the Malaysian Bursa through a questionnaire survey. The analysis shows that ERM implementation varies across different industries and that having an ERM framework in place is more common among firms in the infrastructure, hotel, and technology sectors.

Applying a Systems Model to Enterprise Risk Management

:Enterprise risk management (ERM) has emerged as the new paradigm in risk management with the goal of holistically managing all risks facing an enterprise. Yet organizations still manage risks in a piece-meal fashion and struggle to effectively implement ERM and manage complex strategic risks. This article proposes a solution to this problem: ERM implementation using a system dynamics approach, which enables integrating risks in a causal modeling environment that includes feedback and delays. The methodology is then described using the ISO 31000 Risk Management Standard and illustrated using an example.

Enterprise-wide risk management and organizational fit: a comparative study

Purpose– The purpose of this paper is to analyse enterprise risk management (ERM), its organizational translation and fit, investigating in particular its impact on a major control process: budgeting.Design/methodology/approach– The research was carried out with a multiple case study approach including three companies in the UK. This approach was chosen to gain a deeper understanding of the nature of ERM within each of the organizations and the factors shaping its achievements.Findings– Three main issues emerged. The first is related specifically to ERM implementations and its variety in practice. Second, ERM champions emerged as central in shaping the managerial usefulness of ERM. Third, the cases showed diversity of practice in term of integration with budgeting which range from a voluntary full integration to an voluntary separation.Practical implications– The cases analysed highlighted that the integration between risk and other control processes is a challenge but also a strategic choice. Although conceding that ERM implementation is not linear, companies should reflect upon the type of relations they would like to have between different processes of control.Originality/value– The results of the paper explored ERM organizational fit, evidencing variety in practice and theoretically discussing how this diversity is linked to organizational and technical issues.

Reducing Hindrances to Enterprise Risk Management Implementation in Construction Firms

Although enterprise risk management (ERM) has been advocated in the construction industry, its implementation is still plagued with hindrances. The objectives are to identify the critical hindrances to ERM implementation in Chinese construction firms (CCFs) and investigate the interrelationships among these critical hindrances. To achieve the objectives, 36 hindrances were identified through a literature review and a questionnaire survey was performed with 119 respondents. The results indicated that 20 hindrances were deemed critical, among which insufficient resources (e.g., time, money, and people) was ranked top. Additionally, the critical hindrances were categorized into lack of relevant resources and procedures (LRRP), lack of senior-level support and leadership (LSSL), and lack of high-quality data (LHQD). LSSL contributed to LRRP, whereas LRRP resulted in LHQD. The managerial implications drawn from these results can help the management take measures to overcome them. Although this study is focused on CCFs, other firms may use the identified hindrances and follow the method to prepare their customized list of hindrances.

Investigating Enterprise Risk Management Maturity in Construction Firms

Enterprise risk management (ERM), as a holistic approach to risk management, has been advocated in the construction industry. The objectives of this paper are to assess the ERM maturity in Chinese construction firms (CCFs) based in Singapore and uncover how ERM was implemented in these firms. Through a questionnaire survey with 35 CCFs, the data relating to ERM implementation were collected. The analysis results indicated a low level of ERM maturity in these firms, and the positive association between ERM maturity and firm size. In addition, risk communication, objective setting, and risk-aware culture were the top three scores, while formalized key risk indicators and a risk management information system were the bottom two scores. Moreover, three case studies were conducted. The cross-case comparison results substantiated the survey findings, highlighted the influence of the parent firms on the ERM implementation, and indicated that the firms without formal ERM implementation can still have some practices consistent with the ERM fundamentals. These empirical results are arguably the first to be presented for the construction industry and therefore add to existing knowledge of ERM. In addition, various organizational issues have been identified that may influence ERM maturity. The future development of the ERM body of knowledge can, for enhancement purposes, take into account ERM maturity as well as the organizational issues for implementation. Furthermore, the ERM maturity of Singapore-based CCFs can serve as a ballpark benchmark, with which the other firms can compare in terms of ERM practices, and the similar research design and method can be used to investigate ERM implementation in CCFs located in other countries. Therefore, this paper significantly contributes to the ERM body of knowledge.

Enterprise risk management in SMEs: Towards a structural model

This article analyses enterprise risk management (ERM) in small and medium-sized enterprises (SMEs) by developing a structural model based on a survey questionnaire. Preconditions for ERM implementation, applied ERM approaches and their effects on strategic orientation are derived. The results suggest that SMEs follow either an active or a passive ERM approach, which affects their strategic orientation; a passive approach results in a defensive strategy and an active approach, an offensive strategy. Firm size, sector affiliation and ownership structure influence the implementation of ERM. The applied conceptualization of ERM may help SMEs adjust to a changing environment to gain strategic advantage thus, increasing competitiveness and business success.

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

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.

Enterprise risk management implementation in construction firms

Purpose – The purposes of this paper are to: first, identify the critical drivers for and hindrances to enterprise risk management (ERM) implementation in Singapore-based Chinese construction firms (CCFs); second, interpret the critical drivers and hindrances in tandem with organizational change theories; and third, provide possible strategies to strengthen the drivers and overcome the hindrances. Design/methodology/approach – A questionnaire survey was conducted and responses were received from 35 experienced managers in CCFs operating in Singapore. Findings – A total of 13 drivers and 25 hindrances with significant influence were identified. Of them, “improved decision-making” was the top driver, while “insufficient resources (e.g. time, money, people, etc.)” was the most influential hindrance. Research limitations/implications – As the survey was performed with the Singapore-based CCFs, there may be geographical limitation on the identification of the critical drivers for and hindrances to ERM implementation. The sample size was still small, despite a relatively high response rate. Practical implications – Specific strategies were identified to strengthen the drivers for ERM implementation and overcome the hindrances to ERM implementation. Originality/value – This study present the theoretical rational behind the critical drivers for and hindrances to ERM implementation. As few studies have attempted to investigate ERM in construction firms, this study contributes to the literature through interpreting ERM implementation from an organizational change perspective. The identification of the drivers and hindrances and the managerial implications provide practitioners and academics with valuable information as well as a clear understanding of how to consolidate ERM programs and overcome the hindrances.

Examining the Dimensions of Enterprise Risk Management Implementation Framework, Its Challenges and Benefits: A Study on Malaysian Public Listed Companies

This paper presents important dimensions for an effective implementation of enterprise risk management (ERM) framework, namely the structure, governance and process dimensions. This paper also examines the penetration intensity of ERM implementation among the sampled public listed companies in Malaysia. The significant elements for the proposed ERM implementation framework, its implementation challenge and the perceived benefits are also discussed. Based on a theorized effective ERM implementation, 3 constructs and their measurement variables are highlighted for further discussion through factor analysis in relation to the significance of the variables’ factor loadings. Discussion on the results of the factors extracted vis-a-vis each dimension of ERM implementation intensity, its challenge and the perceived benefit measures will provide insights to a productive practice of ERM by corporations.

Enterprise Risk Managements in Indian Banks

The banking industry is exposed to many risks from different directions. Too many areas needed to be guarded which is not possible unless a holistic and comprehensive risk management process is in order. Enterprise Risk Management (ERM) is that process. The main objective of this project is to study the implementation of ERM in Indian Banking industry. For this purpose different literatures regarding ERM has been studied to get a fair idea about root of ERM, its goals, features, need, scope, utilization and implementation. Application of ERM in Indian banking is studied and research gap is identified, based on which, finer objectives of the research was formed. Annual Reports of forty four banks (nationalized and private commercial banks) in India were chose for qualitative analysis and quantitative analysis. The in depth analysis is enumerated in the paper. It can be stated that this research paper is mainly qualitative in nature where the numerical figures obtained are mostly indicative in nature for a validation purpose of the qualitative findings and conclusions. The most important conclusion drawn is that Risk management is compliance driven in Indian banks and not strategy driven. It is recommended that this attitude should be changed and risk management should be a strategic attribute. Another important finding is that risk management remains only as Basel norm application however ERM is much more than mere Basel implementation, therefore banks need to change their perspective and embrace ERM.

Message from the chair on introducing enterprise risk management (ERM) to a company

Enterprise risk management (ERM), as a theory and practice, has captured the attention of governance experts, boards of directors, regulators, rating agencies and senior management over the last 10 years. Unfortunately, the academic research to date on this topic has been meagre; however, there have been a number of leading practices that illustrate how ERM may be implemented in a simple and effective manner. This article takes the essential features of ERM and provides an imaginary speech that demonstrates what a Chair might say to fellow directors to announce the launch of an ERM program. It is not intended that this is the only way, or necessarily the best way, to launch ERM. Obviously, it should be tailored to each company, the intended audience and each Chair's style. This article draws on the author's 13 years of experience as a Chief Risk officer, as well as his extensive studies of ERM best practices. The success rate for successful implementation of ERM continues to be low. There is much confusion as to exactly what ERM is and how to best achieve value from it. It is expected that material such as this will help guide senior management and board members in understanding what ERM is and in their quest as to how to implement ERM in a simple and effective manner.

The Effect of the Enterprise Risk Management Implementation on the Firm Value of European Companies

We aim to investigate the impact of the adoption of an Enterprise Risk Management (ERM) system on the enterprise value and to discover which are the determinants of this choice. Several economic actors have decided to face the current economic and financial complexity shifting from a Traditional silo-based Risk Management approach (TRM) to a more comprehensive one, the so called Enterprise Risk Management (ERM). Some academics have tried to investigate the effects of the ERM implementation on firm value, mainly focusing on the financial industry. The results are still controversial. Moreover, there is no empirical evidence about the adoption of ERM programs among non-financial companies. The aim of our study is double: first, we try to understand if the ERM implementation affects firm value on a sample of 200 European companies, belonging to both financial and non-financial industries; second, we test which are the determinants of the adoption of an ERM system. We do this performing a fixed effects panel regression analysis (goal 1) and a fixed effects logistic analysis (goal 2). We find a positive statistically significant relation between the ERM adoption and firm value. As for the probability that a firm engages in an ERM protocol, we find that size, the company beta and profitability (ROA) are the statistically significant determinants.

Determinants and Value of Enterprise Risk Management: Empirical Evidence from the Literature

The development of an enterprise risk management (ERM) program enables companies to manage corporate risks in a holistic manner as opposed to the silo‐based perspective in traditional risk management frameworks. One main question in this regard is what factors drive the implementation of an ERM system in companies and whether ERM programs can actually create value once implemented. This article addresses these questions by conducting a comparative assessment of empirical evidence from the literature regarding the determinants of ERM and its value once implemented. In doing so we are able to illustrate differences in model specifications and the underlying data. Our literature study shows that particularly the company size and the level of institutional ownership are significantly positively related to the implementation of ERM in most empirical studies and, furthermore, that ERM generally has a (significant) positive impact on corporate value and performance (to a different extent and depending on the focus of the studies). However, geographic and/or industrial restrictions regarding the underlying data sets partly limit the generalization of the empirical results.

Depth penetration of enterprise risk management model in Malaysian government sector

With the worsening of operating environment due to intense competition brought about by globalisation and market liberalisation, the risks faced by corporate Malaysia have been fierce and getting more complex. Motivated from this issue, we conducted a research to investigate the awareness and depth penetration of Enterprise Risk Management (ERM) in Malaysian Government agencies. After knowing the level of risk management in every sector we can start to implement ERM in every government sectors to reduce their risk and achieve target to have efficient and transparent government. We surveyed the profile and commitment of Public Sectors in Malaysia to ERM practices and used factor analysis and regression analysis to determine the intensity, challenges and benefits of ERM implementation in government sectors. Our finding suggested that implementation of ERM in public sectors can increase the performance and corporate governance of the Malaysian government.

The Effect of the Enterprise Risk Management Implementation on the Firm Value of European Companies

We aim to investigate the impact of the adoption of an Enterprise Risk Management (ERM) system on the enterprise value and to discover which are the determinants of this choice. Several economic actors have decided to face the current economic and financial complexity shifting from a Traditional silo-based Risk Management approach (TRM) to a more comprehensive one, the so called Enterprise Risk Management (ERM). Some academics have tried to investigate the effects of the ERM implementation on firm value, mainly focusing on the financial industry. The results are still controversial. Moreover, there is no empirical evidence about the adoption of ERM programs among non-financial companies. The aim of our study is double: first, we try to understand if the ERM implementation affects firm value on a sample of 200 European companies, belonging to both financial and non-financial industries; second, we test which are the determinants of the adoption of an ERM system. We do this performing a fixed effects panel regression analysis (goal 1) and a fixed effects logistic analysis (goal 2). We find a positive statistically significant relation between the ERM adoption and firm value. As for the probability that a firm engages in an ERM protocol, we find that size, the company beta and profitability (ROA) are the statistically significant determinants.

Enterprise Risk Management (ERM): A Study of ERM Implementation Levels in Brazilian Companies

The objective of this study was to evaluate the level of ERM implementation in Brazilian companies, comparing it to the results found in American companies (Desender, 2007), as well as to find out the influence of ERM in the companies’ corporate governance. We observed the following: companies from the financial sector are more mature in ERM implementation, companies that separate the CEO from the chairman of the board actually have a higher degree of implementation, and, finally, the implementation of ERM in the studied Brazilian companies is more mature than that of the American companies, although the methodological biases of each author must be taken into account. The Brazilian inter-sector results were statistically significant, although the others were not.