Search Results (43)

This study examines the relationship between emotional intelligence and enterprise risk management maturity among risk leaders in Indonesia’s financial services sector, adopting a workplace accountability perspective to explain how leadership behavioural competencies support effective risk ownership, risk communication, and accountable risk decision-making. Drawing on survey data from 280 board-level executives holding the Qualified Risk Governance Professional credential, the study measures emotional intelligence using the Bar-On EQ-i and enterprise risk management maturity using the RIMS Risk Maturity Model. The findings reveal a strong and positive association between emotional intelligence and enterprise risk management maturity, with interpersonal competence and adaptability exhibiting the strongest associations with ERM maturity, while no significant differences are observed across job roles or organisational size. By empirically examining the association between leadership emotional capabilities and the institutionalisation of risk governance, the study contributes to global management and the literature on risk by extending enterprise risk management research beyond technical frameworks and compliance models, particularly within emerging market contexts. The results suggest that emotional intelligence may represent a transferable governance capability that is relevant to organisations operating in complex, uncertain, and globally interconnected environments. Practically, the study suggests that emotional intelligence development may represent a useful complement to leadership and risk capability programmes aimed at supporting risk culture, cross-functional engagement, and accountability. Full article

Although climate change is increasingly recognized as a material risk for firms, the extent to which climate-related risks are operationally integrated into enterprise risk management (ERM) processes remains unclear. This article presents a structured literature review to answer the question of how firms have integrated climate risk assessment, considering both physical and transition risks, into ERM processes. Following the PRISMA 2020 protocol, 22 published articles from Web of Science and Scopus, published between 2018 and 2026, were included in the review. Articles covering financial institutions, as well as policy-only and sectoral-only studies, were excluded. The articles were screened through five eligibility criteria: firm-level focus, governance, risk assessment, climate risk management and/or ERM, and type of climate risk. All articles were assessed by two researchers to reduce bias, and Cohen’s kappa was calculated. Following coding and qualitative analysis, the findings indicate that firms have advanced governance structures, disclosure practices, and analytical assessment tools for climate risk assessment, while operational integration into ERM systems remains limited. Results also reveal persistent integration gaps, including strategic–operational disconnection, temporal and methodological mismatches, symbolic implementation, and systemic and knowledge barriers. These challenges constrain the effective translation of climate risk information into risk management practices and strategic planning. Overall, the study, based only on academic literature, concludes that climate risk integration is still incomplete and weakly embedded within ERM systems. In the expanding regulatory landscape, particularly with IFRS S2, the study provides a baseline for understanding current firm-level practices and future developments in climate risk integration at the academic level. Full article

Earnings management undermines financial transparency and threatens long-term corporate sustainability, particularly in emerging markets where principal–agent conflicts remain pronounced. In China’s capital market, performance-based incentives may motivate managers to manipulate reported earnings, thereby impairing investor protection and governance quality. Despite growing interest in enterprise risk management (ERM) as a holistic governance mechanism, empirical evidence on its effectiveness in constraining earnings manipulation remains limited. This paper investigates the governance role of ERM in mitigating both accrual-based earnings management (AEM) and real earnings management (REM) among Chinese listed firms over the period 2019–2024. Using panel regression models, this study examines whether higher ERM engagement is associated with lower levels of earnings manipulation. The results indicate that ERM is significantly and negatively related to both AEM and REM. These findings remain robust to alternative variable definitions, different sample period specifications, interaction analyses between accrual-based and real earnings management, alternative constructions of ERM (including PCA-based measures and exclusion of reporting-related components), and endogeneity tests using industry–year average ERM as a proxy. Further heterogeneity analyses reveal that the constraining effect of ERM on REM is more pronounced in firms audited by non-Big Four auditors, while the effect is weaker in Big Four audited firms. Overall, the evidence suggests that ERM functions as an effective internal governance mechanism that enhances financial reporting quality and supports sustainable corporate performance. This paper contributes to the sustainability and corporate governance literature by providing empirical evidence from an emerging market context and offers practical implications for regulators and corporate decision-makers seeking to strengthen risk governance frameworks. Full article

Organizations are currently in a stage where the volume of financial transactions and data is constantly growing. The same goes for risks associated with the use of data for risk management and strategic decision-making. The likelihood of transactional errors generally increases with data volume and process complexity, while fraud, although less frequent, may have more severe financial, compliance, and reputational consequences for organizations. Continuous auditing practices and well-established enterprise risk management (ERM) processes, combined with AI-driven pattern recognition, trend analysis and segmentation, can enhance timely detection and proper investigation of suspicious transactions. In areas with large volumes of transactions, the audit sampling process may be a lengthy process and pose a detection risk. Using machine learning (ML) models to support critical business processes could prove effective in managing enterprise risk overall. The current study offers new perspectives on managing risk and assurance with ML model output for flagging possible risky transactions within ERP (SAP) systems data. The study population consists of 69,158 finalized billing records extracted from the SAP production environment of a private sector organization, which covers a six-month operational period. The dataset was divided into an 80/20 train–test split, yielding 55,326 training and 13,832 test instances across six classification categories. The study examines the ML methods’ outcomes from billing datasets and their applicability in enhancing audit, assurance, and ERM processes by evaluating output data results from two supervised classification algorithms—multinomial logistic regression (SoftMax regression) and XGBoost—against various criteria generally accepted as risky in audit engagements. Model performance was assessed using accuracy, precision, recall, F1-score, ROC-AUC, and average precision (AP) from precision–recall curves. The results confirm that XGBoost achieves 99% overall accuracy with a macro F1-score of 0.965, outperforming logistic regression (macro F1 = 0.863), and that ML output allows early investigation and follow-up procedures to minimize the risk of fraud and errors and optimize risk management activities, thus strengthening internal control frameworks. Full article

This study examines the role of Enterprise Risk Management (ERM) in mitigating cyber fraud in Indonesian State-Owned Enterprises (SOEs). As digital transformation increases organizational exposure to cyber risks, effective risk governance mechanisms become essential for safeguarding financial integrity. This research investigates how ERM implementation is associated with cyber fraud prevention and detection within SOEs. The study employs a mixed-methods approach using quantitative firm-year observations from 48 non-financial SOEs during the 2020–2024 period, resulting in 112 pooled observations, complemented by qualitative insights from 25 key informants, including auditors, risk officers, and IT/cybersecurity specialists. The empirical analysis indicates that stronger ERM implementation is positively associated with higher levels of cyber fraud mitigation and improved coordination between financial risk management and information technology governance. The findings also highlight the importance of integrated risk governance structures in strengthening internal controls and organizational resilience against digital threats. However, given the cross-sectional and perception-based nature of the data, the findings should be interpreted as associative rather than causal relationships. This study contributes to the literature on risk governance and digital risk management by providing empirical evidence on the role of ERM in supporting financial accountability and cyber risk mitigation in emerging market SOEs. Full article

Artificial Intelligence (AI) is transforming audit practice by redefining traditional frameworks and enabling the automation of data analysis, risk assessment, substantive testing, and continuous monitoring. This study investigates the effect of AI adoption by audit firms on enterprise risk management (ERM). It further assesses the mediating role of Information Technology (IT) infrastructure flexibility and the moderating roles of technology competencies and organizational culture in this relationship. Data were collected from 355 top managers in Ghana using a judgmental sampling technique based on predefined inclusion and exclusion criteria. The analysis was conducted using Partial Least Squares Structural Equation Modelling (PLS-SEM) with SmartPLS 4.1.1.7. The findings indicate that AI adoption positively and significantly influences ERM and IT infrastructure flexibility. IT infrastructure flexibility also has a positive effect on ERM and partially mediates the relationship between AI adoption and ERM. In addition, technology competencies significantly strengthen the relationship between AI adoption and ERM. Organizational culture positively moderates the relationship between IT infrastructure flexibility and ERM. These insights underscore the need for strategic alignment between AI investments and organizational capabilities. The study contributes to the limited empirical literature on AI-driven ERM in emerging economies and offers insights for policymakers and regulators seeking to promote technology-aided ERM. Full article

This study proposes and pilots a COSO-2017-based enterprise risk management (ERM) maturity index informed by the use of strategic management tools (SMTs) to benchmark strategic risk management capability in service organizations. Using secondary SMT usage data extracted from seven Turkish graduate theses (eight organizations in hotels and hospitals), we computed overall and component-level maturity scores on a standardized 0–1 scale. The average ERM maturity was 0.52 (medium), with stronger Governance and Culture (0.56) than Performance (0.48) and Information, Communication and Reporting (0.51), indicating persistent gaps in risk-to-metrics translation and reporting infrastructures. Hotels exhibited higher maturity than hospitals (0.575 vs. 0.49), and private hospitals outperformed public hospitals (0.57 vs. 0.41). The index illustrates a replicable benchmarking approach to identify capability gaps and prioritize ERM improvements—particularly strengthening KRIs, performance feedback loops, and data-enabled reporting that are central to resilience- and sustainability-oriented decision-making. Full article

Implementing enterprise risk management (ERM) helps organizations identify, assess, and manage emerging risks. As global ecosystems face intensifying environmental, social and governance (ESG) pressures—including climate risks, regulatory demands for sustainability reporting and stakeholder expectations for ecosystem protection —the internal audit function (IAF) plays an increasingly critical role in helping organizations monitor and respond to these risks. Internal auditors’ expertise supports risk identification and assessment, though management maintains responsibility for risk management and control. Using the Committee of Sponsoring Organizations’ (COSO) ERM framework, we review 77 studies across 23 journals published between 2004 and 2024. Prior research primarily examines internal audit’s assurance and consulting roles, with considerably less attention given to activities that compromise independence. While evidence suggests that internal audit quality enhances risk management effectiveness, uncertainty remains about boundaries for consulting activities and technology-enabled assurance. Our synthesis highlights limited empirical insight into internal audit’s strategic partnership role in ERM and identifies future research opportunities for scholars, practitioners and standard setters. Full article

In today’s complex economy, firms face various risks. The increasing risks and exposures hinder top performance and impede investments in new project circles. This study examines how Enterprise Risk Management (ERM) practices affect the non-financial performance of Omani insurance companies and investigates the partial mediating role of Competitive Advantage (CA). Using 439 survey responses analysed with PLS-SEM, the results reveal that ERM practices have a positive and significant effect on non-financial performance, and that CA mediates the effects of Internal Environment, Event Identification, and Risk Assessment. This reinforces the strategic dimension of embedding competitive advantage into risk management frameworks. This study offers evidence of how integrating ERM practices can impact organisational performance. It provides a foundation for ongoing research in sectors and areas not previously examined, particularly in developing countries where organisational resilience is imperative. Our study demonstrates how ERM enhances non-financial performance within insurance companies while supporting the view that ERM is a long-term strategic element, not merely limited to risk management. The research contributes evidence for broader application by demonstrating competitive advantage as a mediator. The model facilitates the investigation of ERM impacts across various sectors and regions, especially in developing countries where organisational resilience is crucial. Full article

The modern workplace grapples with a human energy crisis, characterized by chronic exhaustion, disengagement, and emotional depletion among employees. Traditional well-being initiatives often fail to address this systemic challenge, particularly in industrial contexts. This study introduces the Human Energy Management System (HEMS), a strategic framework to develop, implement, and refine strategies for optimizing workforce energy. Grounded in Industry 5.0’s human-centric, resilient, and sustainable principles, HEMS integrates enterprise risk management (ERM), design thinking, and the Plan-Do-Check-Act (PDCA) cycle. Employing a qualitative Design Science Research (DSR) methodology, the study reframes human energy depletion as an organizational risk, providing a proactive, empathetic, and iterative approach to mitigate workplace stressors. The HEMS framework is developed and evaluated through theoretical modeling, literature benchmarking, and secondary case studies, rather than empirical testing, aligning with DSR’s focus on conceptual validation. Findings suggest HEMS offers a robust tool to operationalize human energy reinforcement strategies in industrial settings. Consistent with the European Union’s vision for human-centric industrial transformation, HEMS enables organizations to foster a resilient, engaged, and thriving workforce in both stable and challenging times. Full article

The market risk measurement of a trading portfolio in banks, specifically the practical implementation of the value-at-risk (VaR) and expected shortfall (ES) models, involves intensive recalls of the pricing engine. Machine learning algorithms may offer a solution to this challenge. In this study, we investigate the application of the Gaussian process (GP) regression and multi-fidelity modeling technique as approximation for the pricing engine. More precisely, multi-fidelity modeling combines models of different fidelity levels, defined as the degree of detail and precision offered by a predictive model or simulation, to achieve rapid yet precise prediction. We use the regression models to predict the prices of mono- and multi-asset equity option portfolios. In our numerical experiments, conducted with data limitation, we observe that both the standard GP model and multi-fidelity GP model outperform both the traditional approaches used in banks and the well-known neural network model in term of pricing accuracy as well as risk calculation efficiency. Full article

This study provides the first evidence of the propensity of globally large industrial US and European firms to adopt enterprise risk management (ERM) processes in response to the recent challenges of systematic global risks associated with pandemics (COVID-19), increased geopolitical risks (e.g., the Ukraine–Russia conflict), increased cybersecurity threats and the challenges posed by climate change and biodiversity loss. Consistent with the predictions of standard risk management theory, it is predicted that there is a positive inter-relationship between the propensity to adopt ERM and total firm risk, after controlling for various firm-related financial characteristics, complexity and sources of idiosyncratic risk. The empirical research is based on an industry-matched sample of the 100 largest US and European firms globally. The empirical results are generally consistent with these predictions, but for European firms, total firm risk is not associated with ERM adoption. Furthermore, there is no statistically significant relationship between sample firms’ risk-adjusted performance and their ERM adoption propensity, and there are also significant cultural–institutional variations that explain the differences between the ERM adoption practices between US and European sub-sample firms. The findings raise new questions about the validity of ERM in addressing globally important risk challenges faced by the largest multinational firms. Full article

The study aims to examine the enterprise risk management (ERM) practices of Ethiopian commercial banks. This approach is undertaken to examine the current approach to enterprise risk management within the Ethiopian banking context. A mixed-methods research design is employed which comprises content analysis and a survey study. The study found that the prevailing emphasis of risk management functions in Ethiopian commercial banks revolves on ensuring compliance with regulatory reporting standards. A significant number of the banks have implemented ERM programs primarily to meet regulatory obligations, rather than leveraging ERM to generate firm value. The study identified several gaps in the risk management function of Ethiopian commercial banks, including lack of integration of risk management with the banks’ mission and core values, failure to assess the resources required for effective risk management and to prioritise resource allocation accordingly, inadequate coverage of relevant activities and functional areas by both risk management and internal audit activities, and limitations on the assignment of chief risk officers (CROs) to oversee the risk management function within the banks. Overall, the maturity level of ERM implementation among Ethiopian commercial banks is moderate and requires further enhancement. Full article

We examine financial reporting and firm operations, focusing specifically on the roles of ‘enterprise risk management’ (ERM), within which a holistic approach is taken to the conceptualization and management of all types of risk. We measure ERM implementation based on information obtained from 2004–2014 financial reports on 648 firms. We find that ERM implementation is associated with higher reporting quality and reduced volatility in future firm performance in terms of both operating cash flows and stock returns. Our difference-in-differences analyses indicate that these associations were strengthened by the introduction of the Securities and Exchange Commission (SEC) final rule in 2010, requiring increased and improved disclosure related to risk oversight. Our findings, which we attribute to the incremental effects of ERM and enhanced risk disclosure over time, point to the substantial advantages of ERM and the importance of related disclosure, which should prove to be of interest to firms as well as policymakers. Full article

We argue for an integrated, decision-oriented enterprise risk management (ERM) system focused on value drivers rather than risk minimization and using quantitative risk aggregation based on the best available information. Our holistic view on ERM includes cultural, organizational, and technical aspects, presenting seven areas for more effective risk governance and resilience grounded in a robust enterprise framework. Our analysis, supported by a structured literature review, covers these seven key areas for ERM development. Our review shows that risk aggregation, quantification, and decision-making support are only covered by a few publications. The paper offers insights on linking risk management with strategic decision-making using risk aggregation techniques (Monte Carlo simulation). Full article