Risk Culture and Strategic Planning Roles on Enterprise Risk Management and Firm Performance in Selected African Countries

Abstract

Enterprise risk management (ERM) research has mostly been limited to factors determining its implementation and its effects on firm performance. Despite a clear need for its establishment in sound risk culture and its integration with strategic planning, organisational leaders continue to implement these management concepts in isolation. Academic research into these conjoint relationships has also received less attention in the literature. This study investigates whether ERM's effect on firm financial performance, measured by return on assets, is mediated by risk culture and strategic planning. The study provides empirical evidence that adopting ERM solely does not enhance a firm's financial performance. The ERM, risk culture, and strategic planning constructs are empirically determined to be correlated. Strategic planning has a direct and positive relationship with firm performance. The study further provides empirical evidence that the positive effects of ERM implementation on firm financial performance are mediated by risk culture and strategic planning. The size of a firm and its financial leverage are remarkable determinants of firm performance, while firm age and growth rate are not. The pieces of evidence have been presented from an under-investigated context in Africa with other contributions to the literature, such as, providing comprehensive measures of ERM and risk culture and responding to calls to synthesise risk and strategic management. This study also advances multiple mediation analysis and the use of PLS-SEM in the ERM literature.

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“…Hence, in the nutshell the alternate hypothesis was accepted. In a similar study, Kanu (2022) established that fact that sound risk culture being mediated with strategic planning (long-term planning) has positive correlation in enhancing return on assets in African context. These shows that the therapeutic risk culture could goes further if well implemented in the long-term plans which would facilitates growth in the return on investment, return on equity, increased in net present value, profitability, patronage and sales revenue.…”

Peran Audit Internal Dalam Penerapan Manajemen Risiko Perusahaan

“…Analisis tersebut mencakup risiko strategis, keuangan, dan operasional (Pecina, Miloš Sprčić, & Dvorski Lacković, 2022). Kinerja perusahaan menjadi lebih baik ketika ERM dibangun dalam budaya risiko yang baik dan dimasukkan ke dalam tahap perencanaan strategis, karena ERM dan perencanaan strategis tidak berfungsi dengan benar tanpa budaya sadar risiko (Kanu, 2022). Dari diskusi tersebut dapat diketahui bahwa budaya perusahaan merupakan factor penting yang harus diperhatikan dalam penerapan risiko manajemen dan hal itu memungkinkan pula bagi auditor untuk mengetahuinya agar dapat membantu melakukan perannya dalam penerapan risiko manajemen dengan efektif.…”

“…Analisis tersebut mencakup risiko strategis, keuangan, dan operasional. Kanu (2022) juga berpendapat bahwa kinerja perusahaan menjadi lebih baik ketika ERM dibangun dalam budaya risiko yang baik dan dimasukkan ke dalam tahap perencanaan strategis, karena ERM dan perencanaan strategis tidak berfungsi dengan benar tanpa budaya sadar risiko. uraian tersebut, diketahui bahwa jika perusahaan ingin menerapkan manajemen risiko yang efektif, perusahaan perlu terbuka pada auditor internal dan jajarannya untuk bersama-sama menciptakan budaya organisasi yang baik dan strategi yang tepat demi keberlangsungan penerapan enterprise risk management.…”