The impact of enterprise risk management on the marginal cost of reducing risk: Evidence from the insurance industry

Strategic Risk Management

“…Another study measuring ERM by word search similarly shows that firms experienced increasing operating profits per unit of risk and a reduction in stock volatility after ERM adoption (Eckles et al, 2014). as a proxy for ERM sophistication.…”

“…A few studies have shown a positive relationship (Eckles, Hoyt, and Miller, 2014;Grace, Leverty, Phillips, and Shimpi, 2014;, others find no beneficial effects (Pagach and Warr, 2010;Quon, Zeghal, and Maingot, 2012;Sekerci, 2012), while Lin, Wen, and Yu (2011) show that it erodes firm value. Such inconsistencies raise questions about whether the anticipated beneficial effects of ERM can be realized.…”

Enterprise Risk Management and firm performance: an integrated model for the banking sector

“…It requires a significant change in the risk management philosophy, culture, business strategy, and internal processes, and technology (Arena et al, 2010;Eckles et al, 2011). This involves direct costs, such as, the cost of acquiring new technology, consultancy cost, training and reorientation cost, and indirect cost such as cost of production or service distraction and change in strategic focus, among others (Dafikpaku, 2011).…”

“…This involves direct costs, such as, the cost of acquiring new technology, consultancy cost, training and reorientation cost, and indirect cost such as cost of production or service distraction and change in strategic focus, among others (Dafikpaku, 2011). Also worth mentioning is that, with a firm's investment in ERM implementation, it takes a longer time for the expected benefits to be fully realized, so the immediate benefits of the implementation may not be easily measured in the short term (Pagach et al, 2010;Eckles et al, 2011).…”

“…The study found a positive and significant relationship between ERM implementation and firm value (measured by Tobin's Q). Another empirical study which found a positive relationship between ERM implementation and firm performance is the study by Eckles et al (2011). In this case, using a sample of firms from the insurance sector, which the researchers tested the hypothesis that practicing ERM reduces a firm's cost of risk.…”