Examining the Relationship Between Enterprise Risk Management and Firm Performance in Malaysia (original) (raw)
Related papers
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.
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.
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.
Journal of Technology Management and Business, 2020
Despite attention given to ERM, particularly after the global financial crisis, Malaysia is still lagging behind in ERM implementation. The development and application of ERM is rather limited in practice. Policymakers, regulators and academics identify the combination of weaknesses in governance structures and failures in risk management as the key causes of the financial crisis. Strength of business performance and growth, depend on both ERM and corporate governance. Hence, this study investigates the influence of corporate governance on enterprise risk management (ERM) implementation. The subject of investigation is non-financial public listed companies (PLCs) of high-risk sectors in Malaysia. The high-risk sectors are utility, energy, and telecommunication and media. The dependent variable is ERM implementation proxy by ERM Score. The independent variable is corporate governance proxy by size of BOD, BOD independence, audit committee (AC) independence, AC financial education, size of risk committee (RC) and RC independence. Data are collected for 2016-2017 and analyze using regression analysis. The study finds size of BOD has positive significant relationship with ERM implementation. While, sector has significant negative relationship with ERM implementation. In the context of Malaysian PLCs of high-risk sectors, corporate governance influence ERM implementation. The size of the board is the significant driver "tone from the top" for ERM implementation. This conclusion leads to recommendations to regulators to emphasize the importance of board members' roles and responsibilities in providing risk oversight. In addition, a policy on minimum and maximum number of board members need to be develop in order to ensure effective risk management oversight.
Enterprise Risk Management and Firm Performance Validated Through 2
— Enterprise Risk Management (ERM) is an essential technique, used to manage a myriad of risks in a holistic manner. This paper presents an ERM implementation framework which is operationalized by fourteen elements. It highlights the impact of ERM towards the firm's performance measured through Economic Value Added (EVA) factors. The research design incorporates descriptive and cross-sectional analysis. Data was collected from 120 public listed companies in Bursa Malaysia through questionnaires survey. Results of the empirical analysis show that ERM implementation has significant positive impact on firm's performance. The results support the hypothesis that the firms which implements ERM will enhance their performance as validated through the perceived measurement of EVA factors. This study offers a perspective of measuring ERM implementation impact through EVA factors as compared to the accounting measures.
2023
Risk management functions as a communication tool, conveying a company's proactive strategies to investors for addressing potential threats. Emphasizing the management of risk and uncertainty proves beneficial for maximizing shareholder value by achieving robust financial performance. Financial performance, employed to discern superior and relevant information, plays a pivotal role in assessing the current financial situation and forecasting future performance. Thi s research explores the intricate relationship between effective risk management and the performance of publicly listed companies in Malaysia. As a quantitative investigation, it involves a robust dataset of 1,216 year-observations spanning four years, from 2018 to 2021, with a specific focus on publicly listed entities. Tobin's Q assesses firm performance, while the effectiveness of risk management is scrutinized by evaluating key risk objectives, including strategy risk, operational risk, reporting risk, and compliance risk. Control variables, such as company size and leverage, are integrated into the research framework. The findings indicate that all key risks, representing effective risk management, significantly influence the firm performance of Malaysian publicly listed companies. This study not only contributes empirical substance to the ongoing discourse on risk management but also offers valuable insights into how the effectiveness of risk management practices impacts the performance of publicly listed companies within the Malaysian context. The research is a significant source of knowledge for investors, executives, and scholars who want to understand the complex relationship between risk management effectiveness and corporate success in the Malaysian public-listed sector.
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.
The Effect of Enterprise Risk Management (ERM) Implementation on SMEs Performance in Malaysia
Malaysian Journal of Social Sciences and Humanities (MJSSH)
This study aims to identify the effect of Enterprise Risk Management (ERM) implementation on SMEs performance in Malaysia. SME performance is used as a dependent variable, whereas eight (8) elements of ERM are based on the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework as the independent variables. Primary data were administered through questionnaires among 312 respondents from the main contributing sectors of SMEs; agriculture, construction, mining and quarrying, services and manufacturing across all states in Malaysia. This study employed six (6) analyses, including descriptive statistics, normality, reliability, correlation, multiple regression analysis and hypothesis testing. Results from correlation analysis indicated that the independent variables represented eight (8) elements of ERM, illustrating a positive, strong correlation with the dependent variable. Multiple regression analysis showed that ERM has a positive effect on SME performance....
SHS Web of Conferences, 2017
*+)+ The primary objective of this study is to explore the extent to which ERM implementation is capable of enhancing shareholders' wealth. A sample of 283 companies operating in the Main Market of Bursa Malaysia was selected. This study utilized the definition of ERM as the independent variable and shareholders' wealth as dependent variable. The overall observation revealed that ERM was significant in explaining the variation in shareholders' wealth. Objective setting, event identification, risk response, control activities, information and communication, and monitoring substantiated the hypothesized relationship. The research framework of this study, which utilized assumptions from stewardship and agency theory, could serve as guidance for future research on organizational control and governance. The study fills the gap in literature which mostly concentrated on the USA and western countries. The CRO and the board should focus more advising functions at the earlier stage of the ERM implementation and monitoring functions once ERM matured.
Canadian Center of Science and Education, 2018
This study explores the impact of the adoption of enterprise risk management (ERM) practices on firm performance. A sample of forty five banking and finance companies listed on the Colombo Stock Exchange (CSE) was selected for this study and uses both primary and secondary data for the empirical analysis. The extent of adoption of ERM practices was assessed by using the ERM integrated framework of committee of sponsoring organization (COSO) of the Treadway Commission of USA. Return on equity (ROE) is used as a proxy to measure the firm performance and uses multivariate regression analysis to assess the impact of key ERM functions on firm performance. This study finds none of the eight key ERM functions suggested by the COSO's ERM integrated framework has a significant impact on firm performance. Event identifications, risk assessment, risk response and information & communication indicate a positive impact on firm performance. However, none of those impacts were significant. Surprisingly, empirical evidence reveals that objective setting; event identification, control activities and monitoring of ERM functions have a negative, but not significant, impact on the firm performance. These findings induce the corporate managers to pay a close attention to the cost-benefits considerations when designing and implementing ERM practices and not heavily relied upon and extensively invest on ERM as a vehicle for creating firm value.