A Critical Analysis of Enterprise Risk Management Processes and its Interdependence on the Corporate Governance Framework (original) (raw)
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Enterprise Risk Management and Corporate Governance
SSRN Electronic Journal, 2019
As of late, a change in outlook has happened with respect to the way organizations view risk management. The pattern now is to take a holistic view of risk management instead of looking at it from a silo-based perspective. An enterprise risk management (ERM) is commonly referred as holistic approach toward managing an organization's risk. For decades, risk management has been a fundamental focus for top managements, particularly in multinationals. Given the benefit of creating greater awareness on the risks potentially faced by the firm, the proponents of enterprise risk management (ERM) also allows for decision-makers to gauge the firm's ability and resilience towards such risks and subsequently enables the formulation of strategies to mitigate such issues. In today's dynamic global environment, the importance of enterprise risk management has accelerated and expanded to include enterprise of all forms and sizes.
Enterprise risk management: An important process for feasible profit and growth
Contaduría y Administración
This study is based on the importance of enterprise risk management systems in the organization. Enterprise risk management is a tool that helps organizations to identify those areas which possess potential risks and on how to mitigate those risks. The objective of this paper is to investigate the importance of the ERM system to the firms' achievement of financial and economic goals. The study focused on four independent variables which are controlling risk, the role of the board of directors, the role of the management, and the size of the organization while the dependent variable is the performance of the firm. Using the quantitative approach, data were collected from 3 organizations namely KPMG Taseer Hadi, Deloitte Pakistan, and a bank known as Islamic Bank, the Bank Islami Private Limited. Purposive sampling was employed to take a 100-sample size from different departments. Key outcomes revealed that the controlling risk, the role of the board of directors, and the size of the organization significantly influenced the performance of the firms while there is no significant impact on the role of management on the firm's performance. Based on these findings, it is highly recommended to implement the ERM system as it will help in achieving the long-term economic and financial goals of the corporation.
Enterprise Risk Management: A Review of Two Decades
Journal of Information System and Technology Management
This paper is a modest review spanning a 20-year period on Enterprise Risk Management. Enterprise Risk Management (ERM) deals with risks and opportunities which have an impact on value creation. Unlike traditional risk management (TRM) which is silobased, ERM is a holistic approach to risk management. Past studies have produced many contradicting results on the impact of ERM implementation on firm performance and also on the factors which are crucial for the successful implementation of ERM. As such, it is of absolute necessity to identify the determinants of ERM implementation and also how ERM improves performance. The research methodology for this paper began with a literature search for ERM-related articles from journals of various rankings from 2000 to 2020. Relevant papers for the review were selected by using the `going backward’ and `going forward’ process. Fifty research papers were selected in this manner for this review. Prior studies have used different variables to show ...
Enterprise risk management: Challenges and the strategies for success
International Journal of Research in Business and Social Science (2147- 4478)
The objective of this paper is to identify the challenges of implementing and adopting an effective ERM system and to suggest alternative strategies that could be pursued as countermeasures to those challenges. This study is based on survey data gathered from 379 respondents representing 129 companies listed on the Colombo Stock Exchange of Sri Lanka. This study found that the lack of availability of information to make risk-based decisions; the need to ensure that all decisions are made within the organization’s risk tolerance level, and the lack of top management support for ERM implementation; are the most influencing challenges for business organizations that obstruct ERM effectiveness. This study suggests that organizations should promote a good corporate culture that fosters ERM supportive internal environment. It is also suggested that the support of the top management and their commitment to being corporative with the firms’ ERM function without making ERM is the sole respon...
Quality Innovation Prosperity, 2020
Purpose: As management systems, enterprise risk management and enterprise performance management pursue similar objectives and influence each other positively. The paper aims to provide an insight into the relationship between Enterprise Risk Management and Business Performance Management.Methodology/Approach: The paper compares the results of an American study with the results of a Slovakian study. First, the American results are cited and interpreted. Then the Slovak results are presented and discussed. Then the results are compared. In the last part an overall conclusion is drawn, the relationships between the results are shown and practical implications are explained.Findings: The results show similarities, but also differences to Enterprise Risk Management and the relationships between Enterprise Risk Management and Business Performance Management. The paper shows that there are differences in both the management approach and the impact on business performance between American ...
Risk management's role in corporate governance
Coulson-Thomas, Colin (2017), Risk Management's Role in Corporate Governance, in Ahluwalia, J. S. (Editor), The Board: Emerging Issues of Corporate Governance & Sustainability Challenges, London, IOD Publishing, 25th October, pp 52-61 [ISBN: 978-81-933766-2-1], 2017
One of the dilemmas faced by directors is the need to be entrepreneurial in ensuring the future succcess of a company while at the same time retaining prudent control. A conversation is required among some directors and boards to review what is meant by risk and risk management, their governance responsibilities in relation to risk, and the extent to which the risk management community is perceived as a help or hinder to addressing contemporary challenges facing boards and their companies, and whether contemporary risk management attitudes and practices inhibit or support risk taking, enterprise and entrepreneurship. Issues that need to be considered include the accountability and professionalism of the risk manangement community, remaining current as risks and requirements change, widening involvement in risk management, learning from other professions, perceptions of risk, risk and responsible business, recognising realities, embracing supply chains and network organisations, chan...
Enterprise Risk Management: Factors Associated with Effective Implementation
SSRN Electronic Journal, 2015
Risk management is undergoing a great change, as organizations shift from the traditional and compartmental to an enterprise wide approach. Consequently, enterprise risk management (ERM) is gaining global attention among risk management professionals and academics. The demand for the adoption of ERM has led to several companies embracing it, yet its implementation has become challenging. Research shows that ERM approach emphasizes a holistic approach for assessing and evaluating the risks that an organization faces as against the "silo" approach of the traditional methods. The extant literature shows that through the reduction of the risk that an organization faces, ERM is capable of improving the performance and value. The study used a non-experimental correlational approach to explore the relationship between the presence of a chief risk officer (CRO) and an audit committee (AC), and the support of top management (TM) in relation to the implementation of ERM. A survey instrument was provided to self-identified risk-management professionals who are members of Survey Monkey Audience Service database. The target sample frame requested for analysis using a power of .95 was (n = 119). However, the final number analyzed was (n = 134). Frequencies and percentages were conducted on the demographic survey items and regression and correlational analyses were also performed. The study findings show that there was a significant relationship between the role of a CRO, the presence of an AC, and the support of TM and the level of ERM deployment. The study also found significant correlations between management support level and CRO, and AC. In addition, a much strong positive correlation was noted between the presence of a CRO and an AC.
Rethinking the Building Blocks of the Enterprise Risk Management Model
Rethinking the building blocks of ERM
Enterprise risk management (ERM) in business includes the methods and processes used by organizations to manage risks and seize opportunities related to the achievement of their objectives. This paper argues, that Enterprise risk management being the process of aligning competitive strategy with the mechanisms that identify, aggregate, mitigate, avoid and transfer risk, is a goal of reducing losses while seizing opportunities in the marketplace. It is a disciplined approach to better manage the effects of uncertainty of an organization's capital and earnings. In theory, according to the authors, ERM guides managers as they coordinate the multitude of tasks in order to identify the potential risks encountered by individual employees, business units, geographic divisions and corporate leadership. The resulting portfolio of risk sets the stage for planning the avoidance, transfer and mitigation of potential risks so the uncertainty of achieving the expected outcome is reduced. Furthermore, the paper highlights that with ERM, effectiveness is predicated on a process orientation, proper tools and high-quality information from operating units and individuals. In this regard, the letter 'E' in the acronym ERM could just as easily stand for employee. Therefore, the importance of employee is important in ethics and legal compliance, where successful management depends as much on how leadership and culture influences employee behaviour as on quantifiable controls and procedures. The above point will ground the first part of the paper. The authors argued that the ethical health of an organization culture has gained importance due to high-profile business failures where material weakness was found in the control environment. This issue will be addressed in the second part of the paper. The details pertaining control