Business strategy, enterprise risk management and organizational performance

Abstract

Purpose This paper aims to identify the influence of business strategy on enterprise risk management (ERM) adoption and organizational performance (OP). In addition, the mediation effect of ERM on the relationship between business strategy and OP is assessed. Design/methodology/approach A cross-sectional analysis of primary data gathered from 174 public listed companies in Malaysian Bourse through survey was conducted. Findings Companies with cost leadership business strategy are more eager to implement ERM compared to companies with differentiation strategy. The results also indicate that ERM implementation has a significant positive impact on OP. Though ERM is a partial mediator of the relationship between cost leadership strategy and OP, it does not mediate the relationship between differentiation strategy and OP. Research limitations/implications One of the limitations of this study was the small number of respondents, comprising only 174 public listed companies. In addition, the manifest variables adopted from previous studies may not be the best indicators to measure latent variables. Nonetheless, this study fills the gaps in ERM studies by determining the impact of different kinds of strategy on ERM adoption and investigating the mediating effect of ERM on the relationship between business strategy and OP. Practical implications Although the trend in Malaysia seems to move toward ERM adoption, evidence shows that it is not widely practiced among Malaysian firms. Directors of Malaysian companies can understand better the impact of enterprise business strategy on the adoption of risk management and how ERM influences OP. The results of this study also provide valuable insights for the corporate governance regulatory authorities. Originality/value This paper is among the few to assess the impact of firm’s strategy on ERM adoption and to determine the mediation effect of ERM on the relationship between business strategy and OP.

Enterprise Risk Management Practices and Firm Performance, the Mediating Role of Competitive Advantage and the Moderating Role of Financial Literacy

“…Similarly, Yilmaz and Flouris (2017) also claimed that ERM practices facilitate SMEs to gain a competitive position in the market by offering lower-priced products. Our findings strongly favor Soltanizadeh et al (2016) who argued that there is a significant relationship between ERM and business strategy.…”

“…In a slightly similar approach, it is argued that ERM is a significant mediator between business strategy and firm performance. However, it plays a significant mediating role between cost strategy and firm performance while it does not mediate the relationship between differentiation strategy and firm performance (Soltanizadeh et al 2016). In fact, ERM practices facilitate a firm to reduce different types of costs during operation, which in turn enhance the performance of the firm (Wang et al 2018;Zou and Hassan 2017).…”

“…Financial literacy moderates the relationship between ERM and competitive advantage in the way that the relationship will be stronger when there is high financial literacy. differentiation strategy and firm performance (Soltanizadeh et al 2016). In fact, ERM practices facilitate a firm to reduce different types of costs during operation, which in turn enhance the performance of the firm (Wang et al 2018;Zou and Hassan 2017).…”

Political ability and strategies of integrative and distributive negotiation as influential factors in entrepreneurial self-efficacy in Mexico

“…Asimismo, el uso adecuado de las habilidades políticas y sus dimensiones, contribuyen al logro de objetivos organizacionales, y como resultado, el éxito personal como de la propia organización, puesto que las habilidades políticas cuentan con dimensiones que son consideradas como una de las estrategias empresariales (Soltanizadeh et al 2016), como también representa uno de los factores que contribuyen al éxito de la iniciativa empresarial y emprendimiento (Vesper y Gartner 1997;Solomon 2007;Gielnik et al 2015) e incluso de aquellas que están consolidadas, aun cuando las organizaciones contemporáneas enfrentan escenarios cada vez más turbulentos y versátiles (Perrewé et al 2000).…”

Total Quality Management and the Role of Management Accountants on Organisational Performance: The Service Sector in Malaysia

“…Path coefficients show the relationship's strength of the independent and dependent variables (Ko, Kirsch, & King, 2005). The R 2 shows the percentages of the variance explained by the explanatory variables (Soltanizadeh, Abdul Rasid, Mottaghi Golshan, & Wan Ismail, 2016). The threshold level for R 2 value is 0.1 (Camisón & López, 2010).…”