The Relationship between Corporate Strategy and Enterprise Risk Management: Evidence from Canada

Abstract

In a context of high competition and economic turmoil, companies are faced with a whole array of financial, strategic and operational risks. To better understand and face repercussions on their activities, companies increasingly adopt integrated risk management systems. The objective of this study is to examine the link between the firm's corporate strategic choices and its risk management approach. Specifically, this paper investigates whether the firm's corporate strategy affects its level of risk exposure, the perception of risk consequences as well as its risk management strategy. Based on a sample of 110 non financial firms listed on the Toronto Stock exchange, we find that risk exposure level, perception of risk consequences and risk management strategy vary according to the firm's business sector. Our results show also that a firm's corporate strategy is a key determinant of its risk management approach.

Research Insights About Risk Governance

“…In a study of 110 non-financial Canadian firms, Ben-Amar, Boujenoui, and Zéghal (2014) found that a firm's risk management approach is directed by the firm's corporate strategy. Content analysis was performed on annual reports for 2007 to examine risk management.…”

Risk Management and Operational Excellence in the Oil and Gas Sector: A Pilot Survey

“…Risk management is defined as the process of conducting risk management planning, identification, analysis, responses, monitoring and control on projects, exploration, operation and distribution (Project Management Institute, 2008). Enterprise risk management is a holistic risk management approach that offers a framework for identifying circumstances that influence organisational objectives, evaluating risk prevalence, noting responses and strategies that attenuate risks, and establishing a process to monitor risks (Ben-Amar et al, 2014). As the mediating variable, enterprise risk management implementation (ERM) constructs are governance, process and structure.…”

Exploring the role of non-financial risk management in strategy processes of large retail banks

“…Ben-Amar et al (2014) contend that choosing the right strategy is critical and that it is the strategy process that will help deliver a positive strategic outcome. This research does not focus on the end strategy developed, rather the strategy process, that generally involves a three-stage process of design, implementation, and control (Hitt et al, 2005).…”

“…The link between risk management and strategy development, as critical inputs into the organisational performance of banks, is therefore vital to understand. To this end, recent research has focussed on the areas of enterprise risk management (Dionne, 2013;Gates et al, 2012;Gorzeń-Mitka, 2013) as well as its specific relationship with strategy (Ben-Amar, Boujenoui & Zeghal, 2014;Mikes, 2009;Sheehan, 2010). There has also been significant research on the impact of financial risk on bank performance (Abdel-Baki & Shoukry, 2013;Bauer & Ryser, 2004;Jin & Zeng, 2013).…”