Three-factor model of Enterprise Risk Management implementation: exploratory study of non-financial companies

Lacković, Ivana Dvorski; Kurnoga, Nataša; Sprčić, Danijela Miloš

doi:10.1057/s41283-021-00086-3

Cited by 10 publications

(18 citation statements)

References 38 publications

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“…This study reflects the importance of the interactive use of RMS as a driver of RM effectiveness and also points to the potential of the interactive use of less developed RMS to improve RM effectiveness. The results suggest that the gap between recommendations and actual implementation of the ERM (Dvorski Lacković et al 2022) could be overcome by adopting an interactive style of using the frameworks. This implies that more attention should be paid to training the RM community, not only on how to codify practices or implement ready-made RM tools, but also on how to develop the use of the tools provided.…”

Section: Discussionmentioning

confidence: 96%

“…As a holistic approach, ERM is considered the most advanced (or mature) RMS design. ERM requires that different risks are coordinated and addressed simultaneously (Dvorski Lacković et al 2022), both for the organization as a whole and across functions, rather than assessing risks within a particular department or function where different types of risks are isolated and treated separately (Cohen et al 2017). It also requires combining traditional quantitative approaches to assess and manage risk exposure with qualitative approaches to manage strategic risks (Davila 2012).…”

Section: Rms Designmentioning

confidence: 99%

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The role of interactive style of use in improving risk management effectiveness

2023

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The purpose of this paper is to investigate how to make risk management systems (RMS) more effective. We identify a critical element for effective RMS, which is neglected in the literature, and argue that the potential of advanced RMS designs (e.g., enterprise risk management—ERM) depends on the interactive style of use. However, interactive use is costly in terms of managers’ time and attention, so many organizations do not use RMS in this way. Using survey data and PLS-SEM, we show for our sample companies that the positive effects of advanced RMS design on effectiveness are fully mediated through interactive use of RMS. This brings on an important implication that a RMS leads to better results when it is used interactively. For example, more interactive use of less developed RMS design (such as the traditional silo-based design) would improve its effectiveness by compensating for the lack of an organization-wide RMS.

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Section: Discussionmentioning

confidence: 96%

Section: Rms Designmentioning

confidence: 99%

The role of interactive style of use in improving risk management effectiveness

2023

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“…The mission dimension of organizational culture is strategic and positively supports the strategic risk management performance (0.356). However, the ERM approach should include strategic, operational, and control perspectives (Dvorski Lacković et al 2022 ); moreover, COSO ( 2017 ) also includes the components of “strategy and objective-setting” and “performance”. The results may have been obtained because a relatively large proportion of companies (approximately 30%) use a version of ERM called “pretend ERM”, where the SMEs have formally implemented an ERM approach, but the risk management system lacks the strategic and operational components of an ERM system and focuses only on the reporting aspect (Dvorski Lacković et al 2022 ; Syrová and Špička 2022a ).…”

Section: Discussionmentioning

confidence: 99%

“…Managers and owners should emphasize the functional implementation of ERM, not just a pretend ERM (Syrová and Špička 2022a ) that lacks all the elements of an ERM approach. The ERM system must not be a “facade without the substance” that does not contribute to better planning and decision-making processes (Dvorski Lacković et al 2022 ).…”

Section: Discussionmentioning

confidence: 99%

Exploring the indirect links between enterprise risk management and the financial performance of SMEs

Syrová

Špička

2022

Risk Manag

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This paper responds to the lack of empirical evidence on how enterprise risk management (ERM) and the financial performance of small and medium-sized enterprises (SMEs) are related. Structural equation modeling is used to explore new mediators in the relationship between ERM and SME financial performance. The results show that organizational culture (mission dimension) and strategic risk management performance are full and positive mediators between ERM and financial performance. These research results highlight the fact that the implementation of ERM in an enterprise does not by itself generate the expected effects without the existence of a mature organizational culture and the monitoring of strategic risk management performance. These findings are particularly relevant for SMEs with “pretend ERM” that lacks the strategic and operational components. ERM also helps to transform the negative effect of foreign capital in SME equity on financial performance into a positive effect.

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“…Enterprise Risk Management (ERM) is a key element of a mature corporate governance system. It enables identification, evaluation and management of key business risks by applying its strategies and tactics [1]. One of its key features is comprehensiveness in terms of managing all risk types, i.e., strategic, operational and financial, as well as analysing their interconnection.…”

Section: Introductionmentioning

confidence: 99%

Qualitative Analysis of Enterprise Risk Management Systems in the Largest European Electric Power Companies

2022

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Enterprise risk management (ERM) is an important element of an efficient and comprehensive corporate governance system. It represents a combination of activities that minimise the negative impacts of the risk exposures on the company’s value and long-term corporate sustainability. Recently, there has been a growing awareness on the role and importance of the risk management function. Such trends are partly driven by the consequences of the last economic and financial crisis on the one hand, and on the other by legal and regulatory requirements. The economic downturn caused by the COVID-19 pandemic, volatility in the energy markets and increased uncertainty expected in the upcoming period reiterate the importance of timely risk management practices, because organisations with developed risk management systems are more resilient in case of crisis. This paper analyses the organisation and level of development of ERM systems in the ten largest European electric power companies. The companies’ data on risk management practices are collected from annual reports and analysed by applying Content Analysis (CA), searching for 29 characteristics of a developed ERM system. Research results reveal that ERM in the largest EU electric power companies can be considered as advanced as it applies the five dimensions of the COSO 2017 framework. The analysis confirms the existence of 27 out of 29 characteristics of a developed ERM system, confirming that these characteristics are rooted not only in the relevant ERM theory, but also in the practice of large and successful electric power companies.

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Three-factor model of Enterprise Risk Management implementation: exploratory study of non-financial companies

Cited by 10 publications

References 38 publications

The role of interactive style of use in improving risk management effectiveness

The role of interactive style of use in improving risk management effectiveness

Exploring the indirect links between enterprise risk management and the financial performance of SMEs

Qualitative Analysis of Enterprise Risk Management Systems in the Largest European Electric Power Companies

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