Factors Affecting Risk Management in Industrial Companies in Jordan
Abstract
:1. Introduction
- The current study’s findings expand earlier research conclusions while also adding some new findings to the body of knowledge, particularly in the field of risk management.
- This study on Jordanian industrial companies can be used as a sample to identify the most significant risk management factors and rank them according to their importance from the perspective of upper and Lower Management.
- To find if there are any differences in the responses of lower and Upper Management in terms of their viewpoints on the importance of the factors.
- This study can be considered the first to investigate all twelve factors that affect risk management and rank them based on their importance from the viewpoint of upper and Lower Management.
- The result of this study provides several important implications for managers and decision makers in Jordanian industrial firms.
- Identifying the least important factors will motivate companies to improve them to reduce risk.
2. Literature Review and Theoretical Framework
2.1. Literature Review
2.1.1. What Is a Risk?
2.1.2. What Is Risk Management?
“… a process, effected by an entity’s board of directors, management, and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives”.
2.1.3. Risk Types
2.1.4. Risk Management Procedures
Risk Identification
Risk Evaluating (Assessment)
Risk Response (Taking Measures)
Risk Monitoring
2.2. Theoretical Framework
2.2.1. Factors Affecting “Risk Management”
Factor 1: Upper Management and Board of Directors
Factor 2: External Audit Quality
Factor 3: Internal Audit Effectiveness
Factor 4: Human Resources Efficiency and Training
Factor 5: Government Rules and Regulations
Factor 6: Communication
Factor 7: Flexibility and Adaptation in the Economic Environment
Factor 8: Information Technology
Factor 9: Organizational Structure
Factor 10: Trust
Factor 11: Culture
Factor 12: Company’s Characteristics (Size)
2.2.2. List of Factors to Be Ranked
2.2.3. Hypothesis
3. Methodology
3.1. Research Population
3.2. Research Sample
3.3. Data Collection
- (1)
- Primary data sources: a questionnaire was created specifically for this study and distributed in both Arabic and English to guarantee a clear understanding of the questions.
- (2)
- Secondary data sources are textbooks and references; personal interviews or via email; articles; annual reports; specialized magazines; and internet sources; theories; previous research; and studies in the field, in addition to published research on the subject.
3.4. Validity and Reliability of Scales
3.5. Data Analysis Techniques
4. Data Analysis
4.1. Demographic Analysis
4.2. Descriptive Analysis
4.3. Hypotheses Testing
5. Conclusions
6. Research Limitations and Recommendations
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
Appendix A. Criterion Validity for all Factors
Factor | Items | Correlation Coefficient | Sig | |
F1 | 1 | Openness to new ideas and initiatives from risk management team member | 0.745 | 0.000 |
2 | Establishment of risk management committees at various levels | 0.837 | 0.000 | |
3 | Clear statement of objectives to be met | 0.763 | 0.000 | |
4 | Seeking employees’ opinions and ideas on strategic issues | 0.726 | 0.000 | |
5 | The board of directors is informed about risks via separate risk reporting | 0.767 | 0.000 | |
6 | Supervisions and reviews by the board of directors of the risk management system | 0.787 | 0.000 | |
7 | Solo responsibility for identifying and assessing risks | 0.644 | 0.000 | |
8 | Joint responsibility of both Upper Management and risk management for risks identifying and evaluating | 0.803 | 0.000 | |
9 | The independence of the members of the board of directors and their positive association with the deployment of the company’s risk management | 0.808 | 0.000 | |
10 | Demonstration of high ethical standards | 0.676 | 0.000 | |
11 | Strategies that are clearly communicated lead to decisions. | 0.735 | 0.000 | |
12 | Subcommittee(s) responsible for oversight of risk and reporting back to the full board | 0.767 | 0.000 | |
13 | Enterprise-wide risk monitoring by assigning a member of Upper Management formally | 0.766 | 0.000 | |
14 | Regularly monitoring a robust set of key risk indicators tracking emerging risks | 0.804 | 0.000 | |
F2 | 15 | Responsibility for risk identification and evaluation | 0.861 | 0.000 |
16 | The presence of an external auditor | 0.785 | 0.000 | |
F3 | 17 | Solo responsibility for risk management in the company | 0.674 | 0.000 |
18 | Supervision and review risk management system | 0.822 | 0.000 | |
19 | Joint responsibility of both Upper Management and internal audit in an enterprise’s stage of risk management deployment | 0.792 | 0.000 | |
20 | A continuous development of internal audit and review systems | 0.844 | 0.000 | |
21 | Commitment to the professional standards for the practice of the profession contributes to the effective risk management of companies | 0.699 | 0.000 | |
22 | Assisting in identifying risk levels, continuously assessing and responding to them | 0.819 | 0.000 | |
23 | Reports are used as an essential tool in making decisions in relation to risk management | 0.747 | 0.000 | |
24 | The presence of an audit committee | 0.696 | 0.000 | |
F4 | 25 | Investing in the skills of employees | 0.754 | 0.000 |
26 | Considering the interest of employees when making strategic decisions | 0.754 | 0.000 | |
27 | Joint participation of both workshops and business units in an enterprise’s stage of risk management deployment | 0.802 | 0.000 | |
28 | The necessary knowledge, skills, and training are possessed by employees to execute their work duties | 0.703 | 0.000 | |
29 | Honesty and justice in behaving with all employees | 0.742 | 0.000 | |
30 | Taking unjustifiable risks while employees are doing their work is not needed | 0.712 | 0.000 | |
31 | Protection for employees who identify and inform Upper Management of risks | 0.767 | 0.000 | |
32 | Ability of sharing opinion and feedback about how risks may affect coworkers’ tasks | 0.777 | 0.000 | |
33 | Sharing possible risks or mistakes with Upper Management helps employees feel comfortable | 0.670 | 0.000 | |
34 | Sharing expert opinions by experienced coworkers to generate insight for newcomers | 0.741 | 0.000 | |
35 | Managers—of all levels—are involved in the development of risk management strategies | 0.708 | 0.000 | |
37 | There is a training for educating managements in the use of risk management instruments | 0.735 | 0.000 | |
F5 | 38 | Observing laws and regulations which affect management of the company | 0.767 | 0.000 |
39 | Government policies influence the formulation of risk management strategies in the company | 0.808 | 0.000 | |
40 | Governance regulation is positively associated with the degree of ERM implementation | 0.842 | 0.000 | |
F6 | 41 | Identifying, aggregating, and broadcasting correct information in a form and time frame that allows employees to fulfill their obligations | 0.724 | 0.000 |
42 | The quality of interaction between company’s Upper Management and employees helps us do our jobs effectively | 0.723 | 0.000 | |
43 | Defined channels allow rapid, obstacle-free communication with Upper Management about potential risks and threats | 0.807 | 0.000 | |
44 | The importance of risk management and risk measures are communicated to employees clearly and consistently by Upper Management | 0.812 | 0.000 | |
46 | Warning signs about risks are communicated efficiently within the department | 0.767 | 0.000 | |
47 | Effective communication with Upper Management for applications exceeding risk limits | 0.826 | 0.000 | |
48 | The reporting tools that are used enhance effective communication | 0.793 | 0.000 | |
49 | Efficiently communicated details to capture maximum information by related parties | 0.818 | 0.000 | |
F7 | 50 | Economic changes influence development of risk management strategies | 0.646 | 0.000 |
51 | New entrants are considered in the industry when developing risk management strategies | 0.745 | 0.000 | |
F8 | 52 | Decisions are usually made at the level where the best information is available | 0.713 | 0.000 |
53 | Upper Management access to qualitative reports on the implementation of risk managing is management in a suitable time | 0.701 | 0.000 | |
54 | Necessary mechanisms and stimuli are used to improve risk management performance | 0.724 | 0.000 | |
F9 | 55 | Organizational growth is positively associated with the degree of risk management implementation | 0.771 | 0.000 |
56 | More fully developed risk management systems for industrial sector firms | 0.849 | 0.000 | |
57 | Less-developed risk management systems for public sector organizations | 0.785 | 0.000 | |
F10 | 58 | Confidence in the integrity of the risk manager | 0.710 | 0.000 |
59 | Confidence that company’s interests will be the main concern of the risk manager all the time | 0.793 | 0.000 | |
60 | Confidence that employee’s interests will be protected by the risk manager all the time | 0.819 | 0.000 | |
61 | Competency of risk managers and other employees | 0.838 | 0.000 | |
62 | Professionalism and dedication of risk managers | 0.794 | 0.000 | |
63 | Ulterior motives or hidden agendas for risk managers | 0.409 | 0.000 | |
F11 | 64 | The way to do business in the organization is governed by a clear and consistent set of values | 0.803 | 0.000 |
65 | The company has a risk-awareness culture | 0.910 | 0.000 | |
66 | Awareness sessions are conducted regularly in the company | 0.910 | 0.000 | |
F12 | 67 | Further-developed risk management deployments are more likely to be in larger firms | 0.892 | 0.000 |
68 | Organizational size is positively associated with the extent of risk management implementation | 0.887 | 0.000 |
Appendix B. The list of the industrial companies in Jordan
Serial | Company No. | Reuters Code | Company Name |
1 | 141002 | JPPC | Jordan Poultry Processing & Marketing |
2 | 141004 | JODA | Jordan Dairy |
3 | 141005 | GENM | General Mining |
4 | 141006 | AALU | Arab Aluminum Industry |
5 | 141009 | ICAG | The Industrial Commercial & Agricultural |
6 | 141011 | NAST | National Steel Industry |
7 | 141012 | DADI | Dar Al Dawa Development & Investment |
8 | 141014 | JOWM | The Jordan Worsted Mills |
9 | 141017 | JOPC | Jordan Paper & Cardboard Factories |
10 | 141018 | JOPH | Jordan Phosphate Mines |
11 | 141019 | JOPI | The Jordan Pipes Manufacturing |
12 | 141023 | APHC | Arab Center for Pharmaceuticals & Chemicals Industries |
13 | 141026 | JOIC | Jordan Chemical Industries |
14 | 141029 | GENI | General Investment |
15 | 141038 | WOOD | Jordan Wood Industries (jwico) |
16 | 141039 | WIRE | National Cable & Wire Manufacturing |
17 | 141042 | JOCM | Jordan Cement Factories |
18 | 141043 | APOT | Arab Potash |
19 | 141052 | UMIC | Universal Modern Industries for Edible Oil |
20 | 141055 | JOIR | Jordan Industrial Resources |
21 | 141059 | JNCC | Middle East Specialized Cables Company (mesc_jordan) |
22 | 141061 | ELZA | Elzay Ready Wear Manufacturing |
23 | 141065 | RMCC | Ready Mix Concrete & Construction Supplies |
24 | 141070 | JOST | Jordan Steel |
25 | 141072 | AEIN | Arab Electrical Industries |
26 | 141073 | MPHA | Middle East Pharmaceutical & Chemical Industries & Medical Appliances |
27 | 141074 | UTOB | Union Tobacco&cigarette Industries |
28 | 141086 | INOH | Comprehensive Multiple Projects |
29 | 141091 | NATA | National Aluminium Industrial |
30 | 141094 | NDAR | Nutridar |
31 | 141097 | MECE | Middle East Complex for Engineering, Electronics & Heavy Industries |
32 | 141098 | ASPMM | Arabian Steel Pipes Manufacturing |
33 | 141103 | NAPT | National Petroleum |
34 | 141130 | JMAG | Jordan Magnesia |
35 | 141141 | JVOI | Jordan Vegetable Oil Industries |
36 | 141170 | SLCA | International Silica Industries |
37 | 141202 | SIRD | Al-salhiah Investment And Real Estate Development |
38 | 141203 | TRAV | Travertine |
39 | 141204 | JPHM | The Jordanian Pharmaceutical Manufacturing |
40 | 141208 | AQRM | Al-quds Ready Mix |
41 | 141209 | MBED | The Arab Pesticides & Veterinary Drugs Manufacturing |
42 | 141210 | HPIC | Hayat Pharmaceutical Industries |
43 | 141213 | CJCC | Jordan Clothing |
44 | 141214 | ASAS | Assas For Concrete Products |
45 | 141215 | UCIC | United Cable Industries |
46 | 141216 | SHLE | National Oil Shale |
47 | 141217 | IPCH | Intermediate Petrochemicals Industries |
48 | 141219 | PHIL | Philadelphia Pharmaceuticals |
49 | 141220 | MANS | United Iron & Steel Manufacturing |
50 | 141222 | SNRA | Siniora Food Industries |
51 | 141223 | SHBA | Sheba Metal Casting |
52 | 141224 | NCCO | Northern Cement |
53 | 142041 | JOPT | Jordan Petroleum Refinery |
References
- Adam, Mohamad, Mukhtaruddin Mukhtaruddin, Hasni Yusrianti, and Sulistiani Sulistiani. 2016. Company Characteristics and Enterprise Risk Management Disclosure: Empirical Study On Indonesia Listed Companies. International Journal of Applied Business and Economic Research 14: 1–18. [Google Scholar]
- Akatov, Nikolay, Zhanna Mingaleva, Ivana Klačková, Gulnara Galieva, and Nataliy Shaidurova. 2019. Expert technology for risk management in the implementation of QRM in a high-tech industrial enterprise. Management Systems in Production Engineering 4: 250–54. [Google Scholar] [CrossRef]
- Akhavan, Peyman, Mehdi Khodabandeh, Lila Rajabion, and Mohamad Reza Zahedi. 2019. Extracting and prioritizing knowledge risk components by considering the knowledge map: Case study of industrial organization. VINE Journal of Information and Knowledge Management Systems 49: 200–12. [Google Scholar] [CrossRef]
- Akter, Rukiya. 2020. Financial Counterparty Credit Risk Management Process of Banglalink Digital Communications Limited. Available online: http://dspace.uiu.ac.bd/handle/52243/1636 (accessed on 12 April 2023).
- Alabdullah, Tariq Tawfeeq Yousif, Essia Ries Ahmed, Mohammed Almashhadani, Sara Kadhim Yousif, Hasan Ahmed Almashhadani, Raghad Almashhadani, and Eskasari Putri. 2021. How Significantly Emerging Economies Benefit from Board Attributes and Risk Management in Enhancing Firm Profitability? Journal of Accounting Science 5: 104–13. [Google Scholar] [CrossRef]
- Alazzabi, Waled Younes E., Hasri Mustafa, and Ahmed Ibrahim Karage. 2020. Risk management, top management support, internal audit activities and fraud mitigation. Journal of Financial Crime 30: 569–82. [Google Scholar] [CrossRef]
- Albasara, Husam Mohammed Musaed, Bipin Kumar Singh, and Vikas Kumar Pandey. 2018. The impact of effective risk management on project success. International Journal for Technological Research in Engineering 5: 3193–6. [Google Scholar]
- Alhassan, Mohammad Mabruk. 2016. Exploring Project Risk Management Practices of Ghanaian Building Contractors. Kumasi: Kwame Nkrumah University of Science and Technology. [Google Scholar]
- Anton, Sorin Gabriel, and Anca Elena Afloarei Nucu. 2020. Enterprise Risk Management: A Literature Review and Agenda for Future Research. Journal of Risk and Financial Management 13: 281. [Google Scholar] [CrossRef]
- Badara, Mu’azu Saidu, and Siti Zabedah Saidin. 2014. Empirical evidence of antecedents of internal audit effectiveness from a Nigerian perspective. Middle-East Journal of Scientific Research 19: 460–69. [Google Scholar]
- Banaitiene, Nerija, and Audrius Banaitis. 2012. Risk management in construction projects. Risk Management-Current Issues and Challenges, 429–48. [Google Scholar] [CrossRef]
- Banham, Russ. 2004. Enterprising views of risk management. Journal of Accountancy 197: 65. [Google Scholar]
- Bartlett, Robert P., III, and Adair Morse. 2020. Small Business Survival Capabilities and Policy Effectiveness: Evidence from Oakland (No. w27629). National Bureau of Economic Research, July. Available online: https://www.nber.org/papers/w27629 (accessed on 12 April 2023). [CrossRef]
- Barton, Thomas L., William G. Shenkir, and Paul L. Walker. 2002. Making Enterprise Risk Management Pay Off: How Leading Companies Implement Risk Management. Upper Saddle River: Financial Times/Prentice Hall PTR. [Google Scholar]
- BCBS. 2006. Core Principles Methodology. Basel Committee on Telecommunication Supervision. Firm for International Settlements. Available online: https://www.bis.org/publ/bcbs130.pdf (accessed on 12 April 2023).
- Beasley, Mark. 1996. An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting Review 71: 443–65. [Google Scholar]
- Beasley, Mark, David Landsittel, and Jeff Thomson. 2010. COSO’s 2010 Report on ERM Current State of Enterprise Risk Oversight. American Institute of Certified Public Accountants (AICPA), December. Available online: https://erm.ncsu.edu/az/erm/i/chan/library/coso-erm-report-dec2010.pdf (accessed on 12 April 2023).
- Beasley, Mark, Richard Clune, and Dana Hermanson. 2005. Enterprise Risk Management: An Empirical Analysis of Factors Associated with the Extent of Implementation. Journal of Accounting and Public Policy 24: 521–31. [Google Scholar] [CrossRef]
- Beasley, Mark, Richard Clune, and Dana Hermanson. 2006. The Impact of Enterprise Risk Management on the Internal Audit Function. Journal of Foriensic Accounting 2006: 1–20. [Google Scholar]
- Boodman, David. 1987. Managing Business Risk. Interfaces 17: 91–96. [Google Scholar] [CrossRef]
- Boussard, Mathieu, Serge Papillon, Pierre Peloso, Matteo Signorini, and Erez Waisbard. 2019. STewARD: SDN and blockchain-based Trust evaluation for Automated Risk management on IoT Devices. Paper presented at the IEEE INFOCOM 2019-IEEE Conference on Computer Communications Workshops (INFOCOM WKSHPS), Paris, France, April 29–May 2; pp. 841–46. [Google Scholar]
- Breakwell, Glynis. 2000. Risk communication: Fators affecting impact. British Medical Bulletin 56: 110–20. [Google Scholar] [CrossRef] [PubMed]
- Cardy, Robert L., and Thirumalai Thattai Selvarajan. 2006. Competencies: Alternative frameworks for competitive advantage. Business Horizons 49: 235–45. [Google Scholar] [CrossRef]
- Carey, Anthony. 2001. Effective risk management in financial institutions: The turnbull approach. Balance Sheet 9: 24–27. [Google Scholar] [CrossRef]
- Chapman, Robert James. 2019. Exploring the value of risk management for projects: Improving capability through the deployment of a maturity model. IEEE Engineering Management Review 47: 126–43. [Google Scholar] [CrossRef]
- Chatterjee, Ranit, Sukhreet Bajwa, Disha Dwivedi, Repaul Kanji, Moniruddin Ahammed, and Rajib Shaw. 2020. COVID-19 Risk Assessment Tool: Dual application of risk communication and risk governance. Progress in Disaster Science 7: 100109. [Google Scholar] [CrossRef]
- Chen, Justine, Ted Hsuan Yun Chen, Ilan Vertinsky, Lilia Yumagulova, and Chansoo Park. 2013. Public-private partnerships for the development of disaster resilient communities. Journal of Contingencies and Crisis Management 21: 130–43. [Google Scholar]
- Colquitt, L. Lee, Robert E. Hoyt, and Ryan B. Lee. 1999. Integrated Risk Management and the Role of the Risk Manager. Risk Management & Insurance Review 2: 43–61. [Google Scholar]
- Committee of Sponsoring Organizations (COSO). 2004. Enterprise “Risk Management”—Integrated Framework. New York: COSO. [Google Scholar]
- Cooper, Dale, Stephen Grey, Geoffrey Raymond, and Phil Walker. 2005. Project Risk Management Guidelines: Managing Risk in Large Projects and Complex Procurements, 1st ed. Chichester: John Wiley & Sons Ltd. ISBN 978-0470022818. [Google Scholar]
- Dabari, Ishaya John, and Siti Zabedah Saidin. 2014. A Theoretical Framework on the Level of Risk Management Implementation in the Nigerian Banking Sector: The Moderating Effect of Upper management Support. Procedia—Social and Behavioral Sciences 164: 627–34. [Google Scholar] [CrossRef]
- Dang, Quyen Thao, Pavlina Jasovska, and Hussain Gulzar Rammal. 2020. International business-government relations: The risk management strategies of MNEs in emerging economies. Journal of World Business 55: 101042. [Google Scholar] [CrossRef]
- Desender, Kurt. 2011. On the determinants of enterprise risk management implementation. In Enterprise IT Governance, Business Value and Performance Measurement. Hershey: IGI Global, pp. 87–100. [Google Scholar] [CrossRef]
- Doloi, Hemanta. 2009. Relational partnerships: The importance of communication, trust and confidence and joint risk management in achieving project success. Construction Management and Economics 27: 1099–109. [Google Scholar] [CrossRef]
- Drucker, Peter F. 1999. Knowledge-Worker Productivity: The Biggest Challenge. California Management Review 41: 79–94. [Google Scholar] [CrossRef]
- Earle, Timothy C. 2010. Trust in risk management: A model—Based review of empirical research. Risk Analysis: An International Journal 30: 541–74. [Google Scholar] [CrossRef] [PubMed]
- Elhag, Taha, Halim Boussabaine, and Tabarak Ballal. 2005. Critical determinants of construction tendering costs: Quantity surveyors’ standpoint. International Journal of Project Management 23: 538–45. Available online: https://www.sciencedirect.com/science/article/pii/S0263786305000529 (accessed on 12 April 2023). [CrossRef]
- Fan, Yiyi, and Mark Stevenson. 2018. A review of supply chain risk management: Definition, theory, and research agenda. International Journal of Physical Distribution & Logistics Management 48: 205–30. [Google Scholar]
- Fitriana, Shifana, and Ratna Wardhani. 2020. The effect of enterprise risk management and sustainability reporting quality on performance: Evidence from Southeast Asia countries. International Journal of Economic Policy in Emerging Economies 13: 344–55. [Google Scholar]
- Frewer, Lynn. 2003. 40 The public and effective risk communication. Toxicology Letters 144: s13–s14. [Google Scholar] [CrossRef]
- Galorath, Daniel. 2006. Risk Management Success Factors. PM World Today 8: 4. [Google Scholar]
- Gamayuni, Rindu Rika. 2018. Factors affecting internal audit function effectivity (internal auditor competence and objectivity, management support and organization culture) at local government. International Journal of Monetary Economics and Finance 11: 179–91. [Google Scholar] [CrossRef]
- Gates, Stephen, and Ellen Hexter. 2005. From Risk Management to Risk Strategy. New York: Conference Board. ISBN 0823708470/9780823708475. [Google Scholar]
- Gentzoglanis, Anastassios. 2010. Risk and regulatory reforms in the securities industry: A need for a paradigm shift? International Journal of Financial Markets and Derivatives 1: 452. [Google Scholar] [CrossRef]
- Giuffrida, Maria, Riccardo Mangiaracina, Alessandro Perego, and Angela Tumino. 2019. Cross-border B2C e-commerce to China: An evaluation of different logistics solutions under uncertainty. International Journal of Physical Distribution and Logistics Management 50: 355–78. [Google Scholar] [CrossRef]
- Grabowski, Martha, and Karlene H. Roberts. 1999. Risk mitigation in virtual organisations. Organisational Science 10: 704–22. [Google Scholar] [CrossRef]
- Hair, Joe, Marko Sarstedt, Lucas Hopkins, and Volker Kuppelwieser. 2014. Partial least squares structural equation modeling (PLS-SEM): An emerging tool in business research. European Business Review 26: 106–21. [Google Scholar] [CrossRef]
- Hair, Joseph, Rolph Anderson, Ronald Tatham, and William Black. 1988. Multivariate Data Analysis with Readings. The Statistician 37: 484. [Google Scholar] [CrossRef]
- Hasanali, Farida. 2002. Critical Success Factors of Knowledge Management. Available online: http://www.providersedge.com/docs/km_articles/Critical_Success_Factors_of_KM.pdf (accessed on 29 March 2009).
- Hayur, Nourhan, and Asmaa Khalas. 2020. The Role of Internal Audit in Helping to Manage Risks. Doctoral dissertation, Abdelhafid Boussouf University Center Mila, Hayur & Khalas, Mila, Algeria. [Google Scholar]
- Henriksen, Per, and Thomas Uhlenfeldt. 2006. Contemporary Enterprise-Wide Risk Management Frameworks: A Comparative Analysis in a Strategic Perspective, 1st ed. Edited by Torben Juul Andersen. Copenhagen Business School Press Printed in Denmark. Odder: Narayana Press. ISBN 87-630-0183-7. [Google Scholar]
- Hillson, David. 2002. Extending the risk process to manage opportunities. International Journal of Project Management 20: 235–40. [Google Scholar] [CrossRef]
- Hunter, Judy. 2002. Improving organizational performance through the use of effective elements of organizational structure. International Journal of Health Care Quality Assurance Incorporating Leadership in Health Services 15: xii–xxi. [Google Scholar] [CrossRef]
- Hutter, Bridget M., and Clive J. Jones. 2007. From government to governance: External influences on business risk management. Regulation & Governance 1: 27–45. [Google Scholar]
- ILO. 2020. COVID-19 Causes Devastating Losses in Working Hours and Employment. Available online: https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_740893/lang–en/index.htm (accessed on 8 June 2020).
- Jia, Liu. 2020. Research on the cost control of cross-border e-commerce overseas warehouse from the perspective of big data technology and storage theory model. Paper presented at the Asia-Pacific Conference on Image Processing, Electronics and Computers (IPEC), Dalian, China, April 14–16; pp. 423–27. [Google Scholar]
- Jordan Investment Commission. 2018. Industry -Sector Profile, Fifth Circle: Musa Bin Nusir Street, Amman, Jordan. Available online: https://www.jic.gov.jo/wp-content/uploads/2018/07/Sector-Profile-Industry-Final-Mar-2018-JIC-1.pdf (accessed on 12 April 2023).
- Klemetti, Anna. 2006. Risk Management in Construction Project Networks (Report 2006/2). Helsinki: Laboratory of Industrial Management, Helsinki University of Technology. [Google Scholar]
- Korkmaz, Oya. 2022. Sustainability Risk Management: A Survey of the Literature. In Insurance and Risk Management for Disruptions in Social, Economic and Environmental Systems: Decision and Control Allocations within New Domains of Risk. Bingley: Emerald Publishing Limited, pp. 207–32. [Google Scholar] [CrossRef]
- Lam, James. 2001. The CRO is here to stay. Risk Management 48: 16. [Google Scholar]
- Larson, Erik, and Clifford Gray. 2011. Project Management: The Managerial Process, 5th ed. New York: The McGraw-Hill-Irwin. [Google Scholar]
- Levine, Jeffrey, and John Miller. 2022. Legal and Risk Management Considerations and Implications of Carelessly Drafted Game Contracts: Avoiding a Legal Hurricane. Journal of Legal Aspects of Sport 32: 95–120. [Google Scholar] [CrossRef] [PubMed]
- Li, Qun, Xuhua Guan, Peng Wu, Xiaoye Wang, Lei Zhou, Yeqing Tong, Ruiqi Ren, Kathy S.M. Leung, Eric H.Y. Lau, Jessica Y. Wong, and et al. 2020. Early Transmission Dynamics in Wuhan, China, of Novel Coronavirus–Infected Pneumonia. New England Journal of Medicine 382: 1199–207. [Google Scholar] [CrossRef] [PubMed]
- Lipton, Martin, Daniel A. Neff, Andrew R. Brownstein, Steven A. Rosenblum, Adam O. Emmerich, and Sebastian L. Fain. 2011. Risk management and the board of directors. Bank and Corporate Governance Law Reporter 45: 793–99. [Google Scholar]
- Lukovac, Vesko, Dragan Pamučar, Milena Popović, and Boban Đorović. 2017. Portfolio model for analyzing human resources: An approach based on neuro-fuzzy modeling and the simulated annealing algorithm. Expert Systems with Applications 90: 318–31. [Google Scholar] [CrossRef]
- Mhetre, Krantikumar, Konnur Amarsinh, and Landage Amarsinh. 2016. Risk Management in Construction Industry. International Journal of Engineering Research 5: 153–5. [Google Scholar]
- Na Ranong, Prapawadee, and Wariya Phuenngam. 2009. Critical Success Factors for Effective Risk Management Procedures in Financial Industries. A Study from the Perspectives of the Financial Institutions in Thailand. Umeå: Umeå University. [Google Scholar]
- Nocco, Brian W., and René M. Stulz. 2006. Enterprise Risk Management: Theory and Practice. Journal of Applied Corporate Finance 18: 1–8. Available online: https://u.osu.edu/stulz.1/files/2017/01/184_nocco-u7sc9u.pdf (accessed on 12 April 2023). [CrossRef]
- NSW Department of State and Regional Development. 2005. Risk Management Guide for Small Business. Global Risk Alliance on the instruction of the New South Wales Department of State and Regional Development, NSW Department of State and Regional Development. Available online: www.smallbiz.nsw.gov.au (accessed on 29 March 2021).
- Obrenovic, Bojan, Jianguo Du, Danijela Godinic, Diana Tsoy, Muhammad Aamir Shafique Khan, and Ilimdorjon Jakhongirov. 2020. Sustaining enterprise operations and productivity during the COVID-19 pandemic: “Enterprise Effectiveness and Sustainability Model”. Sustainability 12: 5981. [Google Scholar] [CrossRef]
- Okello, Veronica A. 2012. Factors influencing the development of risk management strategies by Safaricom Limited. D61/71219/2008. Doctoral dissertation, University of Nairobi, Nairobi, Kenya. [Google Scholar]
- Oliveira, Kyllbert, Mirian Méxas, Marcelo Meirino, and Geisa Drumond. 2018. Critical success factors associated with the implementation of enterprise “Risk Management”. Journal of Risk Research 22: 1–16. [Google Scholar] [CrossRef]
- Önder, Şerife, and Hüseyin Ergin. 2012. Determiners of enterprise risk management applications in Turkey: An empirical study with a logistic regression model of the companies included in ISE (Istanbul Stock Exchange). Business & Economic Horizons 7: 19–26. [Google Scholar]
- Paape, Leen, and Roland F. Speklé. 2011. The design and adoption of enterprise risk management practices: An empirical study. European Accounting Review 21: 533–64. [Google Scholar]
- Petrovic, Dario. 2017. Risk Management in Construction Projects: A Knowledge Management Perspective from Swedish Contractors. Available online: https://www.semanticscholar.org/paper/Risk-Management-in-Construction-Projects-%3A-A-from-Petrovi%C4%87/9ab4b371fc9a41a0b3bb6568bcfeeb0008cbdd20 (accessed on 12 April 2023).
- PMI. 2017. A Guide to Project Management Book of Knowledge (PMBOK Guide), 6th ed. Agile Guide. Newtown Square: PMI. [Google Scholar]
- Potts, Keith, and Nii Ankrah. 2008. Construction Cost Management: Leaning from Case Studies. London and New York: Taylor & Francis Group. ISBN 978-0-203-75294-4(EBK). [Google Scholar]
- PWC (Pricewaterhousecoopers). 2004. 7th Annual Global CEO Survey Managing Risk: An Assessment of CEO Preparedness. New York: PWC. [Google Scholar]
- Quirke, Bill. 1996. Putting communication on management’s Agenda. Journal of Communication Management 1: 67–79. [Google Scholar] [CrossRef]
- Rehman, Amin Ur, and Muhammad Anwar. 2019. Mediating role of enterprise risk management practices between business strategy and SME performance. Small Enterprise Research 26: 1–21. [Google Scholar] [CrossRef]
- Richter, Andreas, and Thomas Wilson. 2020. COVID-19: Implications for insurer risk management and the insurability of pandemic risk. The Geneva Risk and Insurance Review 45: 171–99. [Google Scholar] [CrossRef] [PubMed]
- Rolland, Holly. 2008. Using IT to drive effective risk management. Risk Management 55: 43. Available online: www.rmmag.com (accessed on 30 March 2009).
- Rothrock, Ray A., James Kaplan, and Friso Van Der Oord. 2018. The board’s role in managing cybersecurity risks. MIT Sloan Management Review 59: 12–15. [Google Scholar]
- Rovins, Jane E., Tom M. Wilson, Josh Hayes, and Steven J. Jensen. 2015. Risk Assessment Handbook. (GNS Science Miscellaneous Series; No. 84). GNS Science. Available online: https://www.research.ed.ac.uk/en/publications/risk-assessment-handbook (accessed on 12 April 2023).
- Saeidi, Parvaneh, Sayyedeh Parisa Saeidi, Saudah Sofian, Sayedeh Parastoo Saeidi, Mehrbakhsh Nilashi, and Abbas Mardani. 2019. The impact of enterprise risk management on competitive advantage by moderating role of information technology. Computer standards & interfaces 63: 67–82. [Google Scholar]
- Samimi, Amir. 2020. Risk Management in Information Technology. Progress in Chemical and Biochemical Research 3: 130–34. [Google Scholar] [CrossRef]
- Sekaran, Uma, and Roger Bougie. 2016. Research Methods for Business: A Skill-Building Approach, 7th ed. New York: John Wiley & Sons. ISBN 9781119165552(pbk)/9781119266846(ebk). [Google Scholar]
- Selamat, Mohamad Hisyam, and Othman Ibrahim. 2018. The Moderating Effect of Risk Culture in Relationship between Leadership and Enterprise Risk Management Implementation in Malaysia. Business Management and Strategy 9: 244. [Google Scholar] [CrossRef]
- Serpell, Alfredo, Ximena Ferrada, Larissa Rubio, and Sergio Arauzo. 2015. Evaluating Risk Management Practices in Construction Organizations. Procedia—Social and Behavioral Sciences 194: 201–10. [Google Scholar] [CrossRef]
- Serraino, Andrea. 2014. Introduction to Risk Assessment Terminology. Italian Journal of Food Safety 3. [Google Scholar] [CrossRef]
- Shad, Muhammad Kashif, Fong-Woon Lai, Chuah Lai Fatt, Jiří Jaromír Klemeš, and Awais Bokhari. 2019. Integrating sustainability reporting into enterprise risk management and its relationship with business performance: A conceptual framework. Journal of Cleaner Production 208: 415–25. [Google Scholar] [CrossRef]
- Shah, Ashfaq Ahmad, Rajib Shaw, Jingzhong Ye, Muhammad Abid, Syed Muhammad Amir, A.K.M. Kanak Pervez, and Shaista Naz. 2019. Current capacities, preparedness and needs of local institutions in dealing with disaster risk reduction in Khyber Pakhtunkhwa, Pakistan. International Journal of Disaster Risk Reduction 34: 165–72. [Google Scholar] [CrossRef]
- Smallman, Clive. 2019. Culture and communications: Countering conspiracies in organisational risk management. In Risk Management. Oxfordshire: Routledge, pp. 159–67. [Google Scholar]
- Steyn, Jurie. 2018. Introduction to Project Risk Management: Part 1-Planning for project risk management. Available online: https://www.researchgate.net/publication/327981091_Introduction_to_Project_Risk_Management_Part_1-Planning_for_project_risk_management (accessed on 12 April 2023).
- Thaheem, Muhammad Jamaluddin, Alberto De Marco, and Nur Atakul. 2014. Risk management for sustainable restoration of immovable cultural heritage, part 1: PRM framework. Journal of Cultural Heritage Management and Sustainable Development 4: 149–65. [Google Scholar] [CrossRef]
- Tranchard, Sandrine. 2018. Risk management: The new ISO 31000 keeps risk management simple. Governance Directions 70: 180–82. [Google Scholar]
- Ullah, Fahim, Siddra Qayyum, Muhammad Jamaluddin Thaheem, Fadi Al-Turjman, and Samad M. E. Sepasgozar. 2021. Risk management in sustainable smart cities governance: A TOE framework. Technological Forecasting and Social Change 167: 120743. [Google Scholar] [CrossRef]
- Wang, Ying, Fu Jia, Tobias Schoenherr, Yu Gong, and Lujie Chen. 2020. Cross-border e-commerce firms as supply chain integrators: The management of three flows. Industrial Marketing Management 89: 72–88. [Google Scholar] [CrossRef]
- Waseem-Ul-Hameed, Faiza Hashmi, Mohsin Ali, and Muhammad Arif. 2017. Enterprise risk management (ERM) system: Implementation problem and role of audit effectiveness in Malaysian firms. Asian Journal of Multidisciplinary Studies 5: 34–39. [Google Scholar]
- Williams, Rebecca, and Mike Lilley. 1993. Partner selection for joint-venture agreements. International Journal of Project Management 11: 233–7. [Google Scholar] [CrossRef]
- Willumsen, Pelle, Josef Oehmen, Verena Stingl, and Joana Geraldi. 2019. Value creation through project risk management. International Journal of Project Management 37: 731–49. [Google Scholar] [CrossRef]
- Yakob, Rubayah, Mohd Hafizuddin-Syah Bangaan Abdullah, Sajiah Yakob, Nooraida Yakob, Nurul Hidayah Md. Razali, and Hairolanuar Mohamad. 2022. Analysis of enterprise risk management practices in Malaysian waqf institutions. International Journal of Islamic and Middle Eastern Finance and Management 15: 569–85. [Google Scholar] [CrossRef]
- Yang, Songling, Muhammad Ishtiaq, and Muhammad Anwar. 2018. Enterprise risk management practices and firm performance, the mediating role of competitive advantage and the moderating role of financial literacy. Journal of Risk and Financial Management 11: 35. [Google Scholar]
- Young, Raymond, and Ernest Jordan. 2008. Upper management support: Mantra or necessity? International Journal of Project Management 26: 713–25. Available online: http://www.pmforum.org (accessed on 10 January 2012). [CrossRef]
Factors Affecting Risk Management |
1. Factors related to Upper Management and Board of Directors |
2. Factors related to External Audit Quality |
3. Factors related to Internal Audit Effectiveness |
4. Factors related to Human Resources Efficiency and Training |
5. Factors related to Government Rules and Regulations |
6. Factors related to Communication |
7. Factors related to Flexibility and Adaptation in the Economic Environment |
8. Factors related to Information Technology |
9. Factors related to Organizational Structure |
10. Factors related to Trust |
11. Factors related to Culture |
12. Factors related to Company Characteristics (size) |
Comparisons between the Researchers’ Proposed Factors and the Other Studies | |
---|---|
Researcher(s) | Topic Dealt with |
Commitment and Support from Upper Management and Board of Directors | |
Okello (2012) | Senior management commitment is a key factor in managing risks |
Daniel Galorath (2006) | Upper Management commitment helps to embed risk management at the operational and strategic levels |
Hasanali (2002) | -Leadership -Successful mitigation or bearing of risk is contingent upon commitment and support from Upper Management |
Henriksen and Uhlenfeldt (2006) | Upper Management formulates and decides objectives and strategies for organizational risk management activities, mission, and overall objectives |
Young and Jordan (2008) | Suggest “the essence of Upper Management support related to effective decision-making to manage risk and to researcherize business process change” |
Barton et al. (2002) | The Board of Directors should create a risk management program to protect assets |
Gentzoglanis (2010) | Increase the measures taken, such as hedging the risks, depending on the point of view of senior management and level of confidence |
External audit quality | |
Paape and Speklé (2011) | Firms that hire high-quality auditors are more committed to risk management |
Beasley et al. (2005) | The involvement of auditors has a great impact on the implementation of risk management. |
Desender (2011) | There is a positive relationship between the quality of external audits and the level of implementation of risk management |
Internal audit effectiveness | |
Hayur and Khalas (2020) | A methodology allows internal auditing to provide assurance to the board of directors that the risk management program is managing risks effectively |
Beasley et al. (2006) | Internal auditors play an important role in providing assurance and consulting services related to risk management |
Human resources efficiency and Training | |
(Cardy and Selvarajan 2006) | A great interest currently in human resource efficiency and its role in implementing risk management |
(Badara and Saidin 2014) | There is a positive relationship between the efficiency of human resources and the level of implementation of enterprise risk management |
Okello (2012) | Training is a critical factor for training employees with appropriate skills to deal with risks |
NSW Department of State and Regional Development (2005) | Training staff appropriately |
Government rules and regulations | |
Okello (2012) | Any change in government rules and regulations can be dangerous to business |
(PWC 2004) | Cooperation between corporate governance, risk management, and compliance is essential |
(Paape and Speklé 2011) | Compliance with rules and regulations in risk management and corporate governance must be achieved |
Communication | |
Grabowski and Roberts (1999) | Communication |
Carey (2001) | Verifying your judgments |
Quirke (1996) | Good communication helps employees to receive and deliver the correct message from risk management |
Breakwell (2000) | -Communication in risk management depends on the characteristics of the audience and the source of the message and its content -The source must be trusted in order for the risk management message to be effective |
(Hayur and Khalas 2020) | Risk management collects information to achieve its objectives of control and provide early warnings |
Economic environment | |
Na Ranong and Phuenngam (2009) | Focusing on the strategies in place within the economic environment |
(ILO 2020) | The ability of companies to survive the economic crisis and most risks depends on flexibility and adaptation to commercial operations |
Information Technology | |
Farida Hasanali (2002) | Information technology infrastructure |
Organizational Structure | |
Farida Hasanali (2002) | -Structure, roles, and responsibilities - Organizational structure is equally important because it provides direction and support to employees |
NSW Department of State and Regional Development (2005) | Setting clear objectives and guidelines for risk management |
Hunter (2002) | The structure provides prior researcherity to determine how employees work |
Trust | |
Grabowski and Roberts (1999) | Trust makes the members of the organization focus on their tasks without doubts |
Hasanali (2002) | Risk management needs trust in order to cooperate, have teamwork, and to be successful |
(Earle 2010) | The effect of trust on risk management is greater when knowledge is little or missing |
Culture | |
Grabowski and Roberts (1999) | Organizational culture |
(Selamat and Ibrahim 2018) | The implementation of risk management is linked to a risk culture |
(Nocco and Stulz 2006) | Three factors associated with ERM are usually grouped under the leadership construct |
Farida Hasanali (2002) | Culture |
Company Characteristics (size) | |
Önder and Ergin (2012) | The most important factors positively affecting the implementation of risk management are the size of the company and its financial leverage |
Colquitt et al. (1999) | Large firms will likely adopt enterprise risk management due to their need for a comprehensive risk management strategy |
Beasley et al. (2010) | There is a positive relationship between the size of the company and risk management implementation |
Mean Values | 1–1.80 | 1.81–2.6 | 2.61–3.4 | 3.41–4.2 | 4.21–5.00 |
---|---|---|---|---|---|
Agreement Level | Very low | Low | Moderate | High | Very High |
Respondents’ Information | Frequency | % |
---|---|---|
Job Position | ||
Upper Management | 160 | 66% |
Lower Management | 82 | 33% |
Total | 242 | |
Qualifications | ||
Technical/Vocational Certificate | 10 | 4% |
Diploma | 16 | 7% |
Bachelor’s degree | 121 | 50% |
Master’s degree | 57 | 24% |
PhD | 33 | 13% |
Others | 5 | 2% |
Total | 242 | |
Years of Experience | ||
Less than 3 years | 21 | 9% |
less than 5 years | 12 | 5% |
5 to 10 years | 61 | 25% |
10 years and more | 148 | 61% |
Total | 242 | |
Is there a functionally independent department for risk management | ||
Yes | 109 | 45% |
No | 133 | 55% |
Total | 242 |
Factor | Mean | Standard Deviation | COV | RII | Overall Rank | |
---|---|---|---|---|---|---|
1 | Factors related to Top Management and Board of Directors | 3.8415 | 0.96221 | 25.05% | 77.93% | 5 |
2 | Factors related to External Audit Quality | 3.9339 | 1.01838 | 25.89% | 82.97% | 3 |
3 | Factors related to Internal Audit Effectiveness | 3.8392 | 0.86791 | 22.61% | 75.86% | 8 |
4 | Factors related to Human Resources Efficiency and Training | 3.8392 | 0.86791 | 22.61% | 75.37% | 10 |
5 | Factors related to Government Rules and Regulations | 4.0592 | 0.89807 | 22.12% | 81.48% | 4 |
6 | Factors related to Communications | 3.8489 | 0.87060 | 22.62% | 76.11% | 7 |
7 | Factors related to Flexibility and Adaptation in the Economic Environment | 3.9897 | 0.92728 | 23.24% | 83.80% | 2 |
8 | Factors related to the Information Technology | 3.5372 | 0.82757 | 23.40% | 70.33% | 12 |
9 | Factors related to the Organizational Structure | 3.8981 | 0.93134 | 23.89% | 77.68% | 6 |
10 | Factors related to Trust | 3.7273 | 0.88817 | 23.83% | 75.53% | 9 |
11 | Factors related toCompany culture | 3.7397 | 1.01791 | 27.22% | 75.28% | 11 |
12 | Factors related to the Company’s Characteristics | 4.0111 | 0.98542 | 23.92% | 85.28% | 1 |
Factors | Upper Management | Lower Management | ||
---|---|---|---|---|
RII | Rank | RII | Rank | |
Factors related to Top management and Board of Directors | 80.93% | 5 | 79.22% | 6 |
Factors related to External Audit Quality | 83.97% | 3 | 81.16% | 2 |
Factors related to Internal Audit Effectiveness | 76.25% | 7 | 74.98% | 10 |
Factors related to Human Resources Efficiency and Training | 74.22% | 9 | 75.89% | 9 |
Factors related to Government Rules and Regulations | 83.48% | 4 | 80.54% | 4 |
Factors related to Communications | 74.11% | 10 | 77.44% | 7 |
Factors related to Flexibility and Adaptation in the Economic Environment | 84.61% | 1 | 80.17% | 5 |
Factors related to the Information Technology | 72.33% | 11 | 70.76% | 12 |
Factors related to the Organizational Structure | 78.68% | 6 | 80.79% | 3 |
Factors related to Trust | 74.54% | 8 | 76.87% | 8 |
Factors related to the Company Culture | 72.28% | 12 | 73.53% | 11 |
Factors related to the Company’s Characteristics | 84.28% | 2 | 82.14% | 1 |
Mann–Whitney | 106.5 | |||
Sig | 0.654 | |||
Kendall’s Coefficient | 0.458 | |||
Sig | 0.000 |
For Upper Management | For Lower Management |
---|---|
1—Factors related to Flexibility and adaptation in the economic environment | 1—Factors related to Company’s Characteristics |
2—Factors related to Company’s Characteristics | 2—Factors related to External Audit Quality |
3—Factors related to External Audit Quality | 3—Factors related to Organizational Structure |
4—Factors related to Government Rules and Regulations | 4—Factors related to Government Rules and Regulations |
5—Factors related to Top Management and Board of Directors | 5—Factors related to Flexibility and Adaptation in the Economic Environment |
6—Factors related to Organizational Structure | 6—Factors related to Top Management and Board of Directors |
7—Factors related to Internal Audit Effectiveness | 7—Factors related to Communications |
8—Factors related to Trust | 8—Factors related to Trust |
9—Factors related to Human Resources Efficiency and Training | 9—Factors related to Human Resources Efficiency and Training |
10—Factors related to Communications | 10—Factors related to Internal Audit Effectiveness |
11—Factors related to Information Technology | 11—Factors related to the Company’s Culture |
12—Factors related to the Company’s Culture | 12—Factors related to Information Technology |
Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content. |
© 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).
Share and Cite
Abu Kwaik, N.; Sweis, R.; Allan, B.; Sweis, G. Factors Affecting Risk Management in Industrial Companies in Jordan. Adm. Sci. 2023, 13, 132. https://doi.org/10.3390/admsci13050132
Abu Kwaik N, Sweis R, Allan B, Sweis G. Factors Affecting Risk Management in Industrial Companies in Jordan. Administrative Sciences. 2023; 13(5):132. https://doi.org/10.3390/admsci13050132
Chicago/Turabian StyleAbu Kwaik, Nadia, Rateb Sweis, Baraa Allan, and Ghaleb Sweis. 2023. "Factors Affecting Risk Management in Industrial Companies in Jordan" Administrative Sciences 13, no. 5: 132. https://doi.org/10.3390/admsci13050132