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Why firms implement risk governance - Stepping beyond traditional risk management to enterprise risk management

Lundqvist, Sara LU (2015) In Journal of Accounting and Public Policy 34(5). p.441-466
Abstract
Stakeholders of firms have pushed for enterprise risk management (ERM) as a response to flawed risk management and corporate governance systems (Kirkpatrick, 2009). Previous studies explaining why ERM is implemented have been informative but overly simplified. The basic argument presented in this study is that ERM should be seen as a composition of traditional risk management and risk governance, each with their own determining factors. Implementation of risk governance is the active step beyond traditional risk management to ERM. This study addresses the complexity of ERM by dividing it into its traditional risk management and risk governance components and investigating the determinants of these components separately but simultaneously.... (More)
Stakeholders of firms have pushed for enterprise risk management (ERM) as a response to flawed risk management and corporate governance systems (Kirkpatrick, 2009). Previous studies explaining why ERM is implemented have been informative but overly simplified. The basic argument presented in this study is that ERM should be seen as a composition of traditional risk management and risk governance, each with their own determining factors. Implementation of risk governance is the active step beyond traditional risk management to ERM. This study addresses the complexity of ERM by dividing it into its traditional risk management and risk governance components and investigating the determinants of these components separately but simultaneously. Based on a survey of 145 firms, empirical evidence suggests that the level of risk governance in a firm is related to the size of the firm, leverage and dividend payments and the chief executive officer's influence on the board; this may suggest that corporate governance motives, like the need for governance, existing governance and the control a CEO has over governance decisions, determine the decision to take the step toward implementing ERM. This study is a step toward clarifying the existing ad hoc theoretical foundations of ERM and implies that firms are implementing ERM in accordance with stakeholder desires for better governance of the risk management system. (C) 2015 Elsevier Inc. All rights reserved. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Journal of Accounting and Public Policy
volume
34
issue
5
pages
441 - 466
publisher
Elsevier
external identifiers
  • wos:000363824100001
  • scopus:84943662355
ISSN
1873-2070
DOI
10.1016/j.jaccpubpol.2015.05.002
language
English
LU publication?
yes
id
1dfa0b4f-8338-4f9a-94e2-4d875935d1f9 (old id 8404898)
date added to LUP
2015-12-21 09:38:15
date last changed
2017-08-27 03:13:05
@article{1dfa0b4f-8338-4f9a-94e2-4d875935d1f9,
  abstract     = {Stakeholders of firms have pushed for enterprise risk management (ERM) as a response to flawed risk management and corporate governance systems (Kirkpatrick, 2009). Previous studies explaining why ERM is implemented have been informative but overly simplified. The basic argument presented in this study is that ERM should be seen as a composition of traditional risk management and risk governance, each with their own determining factors. Implementation of risk governance is the active step beyond traditional risk management to ERM. This study addresses the complexity of ERM by dividing it into its traditional risk management and risk governance components and investigating the determinants of these components separately but simultaneously. Based on a survey of 145 firms, empirical evidence suggests that the level of risk governance in a firm is related to the size of the firm, leverage and dividend payments and the chief executive officer's influence on the board; this may suggest that corporate governance motives, like the need for governance, existing governance and the control a CEO has over governance decisions, determine the decision to take the step toward implementing ERM. This study is a step toward clarifying the existing ad hoc theoretical foundations of ERM and implies that firms are implementing ERM in accordance with stakeholder desires for better governance of the risk management system. (C) 2015 Elsevier Inc. All rights reserved.},
  author       = {Lundqvist, Sara},
  issn         = {1873-2070},
  language     = {eng},
  number       = {5},
  pages        = {441--466},
  publisher    = {Elsevier},
  series       = {Journal of Accounting and Public Policy},
  title        = {Why firms implement risk governance - Stepping beyond traditional risk management to enterprise risk management},
  url          = {http://dx.doi.org/10.1016/j.jaccpubpol.2015.05.002},
  volume       = {34},
  year         = {2015},
}