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An Exploratory Study of Enterprise Risk Management Pillars of ERM

Lundqvist, Sara LU (2014) In Journal of Accounting, Auditing & Finance 29(3). p.393-429
Abstract
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... (More)
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. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
enterprise risk management, holistic risk management, exploratory factor analysis, risk management
in
Journal of Accounting, Auditing & Finance
volume
29
issue
3
pages
393 - 429
publisher
SAGE Publications Inc.
external identifiers
  • scopus:84925306791
ISSN
2160-4061
DOI
10.1177/0148558X14535780
language
English
LU publication?
yes
id
87bcf483-2cd8-4d12-af92-7879199a765c (old id 5051682)
date added to LUP
2015-02-19 15:33:51
date last changed
2017-08-27 04:46:56
@article{87bcf483-2cd8-4d12-af92-7879199a765c,
  abstract     = {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.},
  author       = {Lundqvist, Sara},
  issn         = {2160-4061},
  keyword      = {enterprise risk management,holistic risk management,exploratory factor analysis,risk management},
  language     = {eng},
  number       = {3},
  pages        = {393--429},
  publisher    = {SAGE Publications Inc.},
  series       = {Journal of Accounting, Auditing & Finance},
  title        = {An Exploratory Study of Enterprise Risk Management Pillars of ERM},
  url          = {http://dx.doi.org/10.1177/0148558X14535780},
  volume       = {29},
  year         = {2014},
}