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An Exploratory Study of Enterprise Risk Management Pillars of ERM

På svenska

Author

  • Sara Lundqvist

Summary, in English

There is a general consensus that enterprise risk management’s (ERM) popularity has resulted from a response to pressure on organizations to holistically manage risk. Multiple frameworks for implementation of ERM contribute to an overall uncertainty regarding the essential components of ERM. This uncertainty carries forward to empirical studies of ERM where results regarding value creation are inconclusive. There exists no real consensus about what the principal components of ERM are; this has led to identification and measurement methods that are inconsistent. By using inconsistent indicators and measures of ERM implementation, it is impossible to compare “apples to apples” and arrive at conclusive and convincing results regarding ERM’s ability to create value. This is an exploratory study of ERM aimed at determining the integral components of ERM based on how firms actually implement ERM dimensions. The result is the identification of four discrete components, or pillars, of ERM implementation; two prerequisite components related to the general internal environment and control activities of the firm, one component identifying risk management activities of the firm and one component with the defining attributes of ERM implementation. All four components must be implemented to have well-implemented ERM, but only one separates ERM firms from non-ERM firms. The resulting four components challenge existing frameworks to adapt to better reflect how firms implement ERM and can have a valuable impact on identifying and measuring ERM, leading to more informative empirical studies on the value creating abilities of ERM.

Publishing year

2014

Language

English

Pages

393-429

Publication/Series

Journal of Accounting, Auditing & Finance

Volume

29

Issue

3

Document type

Journal article

Publisher

SAGE Publications

Topic

  • Business Administration

Keywords

  • enterprise risk management
  • holistic risk management
  • exploratory factor analysis
  • risk management

Status

Published

Research group

  • Knut Wicksell Centre for Financial Studies

ISBN/ISSN/Other

  • ISSN: 2160-4061