The Effect of Enterprise Risk Management (ERM) Implementation on SMEs Performance in Malaysia (original) (raw)
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International Journal of Academic Research in Business and Social Sciences
According to the World Bank research involving SMEs from 104 developing countries has found that small firms have the largest shares of job creation, highest sales growth and employment growth compare to large firm. However, large firm is more productive. Similarly, SMEs in Malaysia also contribute significantly to the economic development especially in creating new job opportunities. SMEs involvements in business expose themselves to risks. Hence, SMEs need risk management. A review of current literature was focus to the adoption of ERM among large firm. However studies that have been conducted to examine ERM adoption among SME are still lacking. More important, the identification of adopters and non-adopters are based on the large firm's ERM indicator such as Chief Risk Officer (CRO) or COSO (2004) whereas SMEs with difference characteristic need a suitable adopters and non-adopters identification process. Thus, the main objective of this paper is to propose a simple and systematic identification process of adopters and non-adapters of ERM for SMEs.
A Conceptual Framework of ERM Practices among SMEs IN Malaysia
International Journal of Academic Research in Business and Social Sciences
According to the World Bank research involving small and medium enterprises (SMEs) from 104 developing countries has found that SMEs have the largest shares of job creation, highest sales growth and employment growth compare to large firm. However, large firm is more productive. Low productivity is one of the symptoms of SMEs failure or crisis and part of the risk. Similarly, SMEs in Malaysia involvements in business expose themselves to risks. Hence, SMEs need risk management. The concept of risk management evolves over the years and now being referred as Enterprise Risk Management (ERM). ERM can be defined as an integrated approach of mitigating risk to achieve business objectives and attain competitive advantage. A review of current literature showed that the adoption of ERM contribute to large firm performance. However studies that have been conducted to examine ERM adoption among SMEs and its performance are still lacking. Furthermore, SMEs involvement in risk management is not encouraging. Although ERM is known as a tool to increase shareholders' value, still not many firms have adopted this new tool to manage risks. Thus, the main objective of this paper is to propose a conceptual framework using Thong's DTOE Model (1999) in the context of ERM practices among Malaysian SMEs. The framework consist of four (4) constructs namely decision maker, technology, organization and environment. From the review of various literatures, the four constructs proposed do supported by many researches but yet still can be explore to enhance SMEs performance in Malaysia.
The Role of Enterprise Risk Management on SMEs Performance: A Review Paper
The Journal of Management Theory and Practice (JMTP)
SMEs have proved their ability to contribute to economic growth and become Malaysia's most prominent business economy. As a result, many Malaysians, particularly the younger generation, are involved in this field because they believe that entrepreneurship will help them improve their living standards and income level. Furthermore, government support is one of the reasons why young Malaysians want to be entrepreneurs. However, many Malaysian entrepreneurs have struggled to survive in the first five years of business operation due to the risks and challenges. As a result, using comprehensive literature review, this paper aim to review some of the previous papers on the importance of risk management in SMEs and find gaps from these papers. This review paper can help grasp new research opportunities that can be conducted in the future. Thus, this paper suggested implementing an enterprise risk management index to help entrepreneurs measure their readiness before entering the entrepr...
ASR: Chiang Mai University Journal of Social Sciences and Humanities, 2019
Even though enterprise risk management (ERM) has been extensively studied in recent years, the influence of ERM on firm performance in small and medium enterprises (SMEs) and its benefits to them has been little studied in emerging countries. Therefore, the main objectives of the study reported were to (1) investigate the extent and level of ERM among SMEs in southern Thailand, and (2) test for the influence of ERM on firm performance measured by the balanced scorecard (BSC) of SMEs. Using a mailed questionnaire, a sample of 385 (out of 394) SMEs from southern Thailand were analyzed. Descriptive analysis, a correlation matrix, and multiple regression were used to analyze the data obtained. From the results, the most common element of ERM employed was information and communication followed by control activities, monitoring, risk response, internal environment, event identification, objective setting, and risk assessment. Moreover, objective setting, risk assessment, control activities, and monitoring were found to significantly and positively influence SMEs' performance measured by BSC while event identification had a negative influence on SMEs' performance. The study demonstrates that SMEs in developing countries can benefit from the adoption of ERM in the same way as large firms in developed countries.
Examining the Relationship Between Enterprise Risk Management and Firm Performance in Malaysia
International Journal of Financial Research, 2019
This study aims to examine the relationship between enterprise risk management (ERM) implementation and firm performance in Malaysia. Using the sample from 2010 to 2016, this study examines the relationship between ERM and firm performance among Malaysian top 100 public listed firms registered on the Index FTSE Bursa Malaysia 100 (FBM100) KLSE. This study also provides comparisons before and after the introduction of Bursa Malaysia Guidelines 2013. This study shows a positive and significant coefficient between profitability and firm performance towards ERM implementation. However, this study shows insignificant relationship between firm size, financial leverage and audit firm with firm performance. This study also shows that there is an increase in the mean score and standard deviation of these variables after the implementation of Bursa Malaysia Guideline 2013. The findings in this study provides an understanding to the Malaysian public listed firms on the importance of ERM and su...
Enterprise Risk Management: Evidence from Small-Medium Enterprises
2016
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 c...
Blue Eyes Intelligence Engineering & Sciences Publication , 2020
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 ERM-performance-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.
International Journal of Business and Management
This paper intends to vindicate the influence of Enterprise Risk Management (ERM) implementation on firm performance. A sample of 11 oil and gas Public Listed Companies (PLC’s) were selected in this study. Data were collected using content analysis with regard to the companies’ ERM practices and their financial performances. ERM implementation was measured using COSO’s ERM integrated framework while the firm financial performance was assessed through return on assets (ROA) measurement. Multiple regression analysis was performed to test eight developed hypotheses. Results indicate that four components of the ERM framework, i.e. supportive internal environment, objective setting, control and monitoring activities, are found to be positive and significant predictors for the firm’s performance. The findings support the efficacy and potential strengths of ERM implementation in the oil and gas companies.
International Business Research, 2011
Enterprise Risk Management (ERM) is a new concept of managing risks holistically and in Malaysia, such a concept is still relatively new among Malaysian companies. On a positive note however, the ERM concept appear to be receiving much attention over the recent years from various businesses and industries in Malaysia. This particular study aims to determine the level of ERM adoption among the Government-Linked Companies (GLCs) and to examine the influence of Chief Risk Officers (CROs) and Board of Directors (BODSs) on the ERM implementation itself. Findings of the study showed that the more established GLCs were more receptive to the adoption of ERM as compared to the less established ones. Also, companies that adopt ERM were found to have appointed the Chief Risk Officers (CROs). In addition, the quality of Board of Directors (BODSs) was also found to play a significant role in respect of ERM implementation.
International Business Research, 2011
Enterprise Risk Management (ERM) has become an important subject of increasing interest among businesses and industries throughout the world. Along the same note, ERM is considered a critical management practice for companies to mitigate risks effectively. The main objective of this paper is to propose a conceptual framework for determinants of companies in Malaysia that implement ERM. From the review of various literatures available in this particular area of interest, several factors are found to be the main determinants of companies that implement ERM. Such factors are the presence of chief risk officer, leverage, profitability, international diversification, majority shareholder, size and turnover.