The Relationship between Enterprise Risk Management and Cost of Capital

Shad, Muhammad Kashif; Lai, Fong–Woon; Shamim, Amjad; McShane, Michael K.; Zahid, Sheikh Muhammad

doi:10.21315/aamj2022.27.1.4

Cited by 7 publications

(6 citation statements)

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“…This study aims to confirm whether adequate risk management techniques provide reward systems to firms to reduce the cost of capital and reduce the sustainability risk to improve the industry's sustainable development (Shad et al, 2022).…”

Section: Discussionmentioning

confidence: 99%

Efficacy of Enterprise Risk Management in Enhancing Sustainability and Financial Performance in the Solar PV Industry: A Conceptual Framework

Mahwish,

Lai,

Kashif Shad

et al. 2023

KSS

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As an alternative to fossil fuels, solar PV electricity can help mitigate global warming and improve the environment by lowering greenhouse gas emissions (GHG). More nations have developed programs to encourage the production and use of PV electricity, considering the potential of renewable energy for sustainable development. The government of Malaysia wants solar PV to be the primary source of renewable energy by 2030. To reduce global warming, renewable energy technology must be implemented more widely. However, the production of solar photovoltaic modules raises serious sustainability concerns. These concerns include using conflict minerals, toxicity, and limited supply or supply chain governance risks of rare materials. Even though solar energy projects are technically feasible, stakeholders still view the region’s initiatives as risky due to ongoing governance problems. Domains related to solar project deployment that involve installation, operation, and management are particularly susceptible to governance issues, such as a lack of accountability and transparency. Renewable energy investments upfront are risky and expensive. Risks in the solar PV value chain include subpar design and manufacturing decisions, inventory losses, quality problems during the execution process, and cultural and societal problems brought on by the absence of an effective risk management system. This study thus investigates how the implementation of ERM influences the company’s financial performance. Enterprise Risk Management (ERM) is a technique that regulates, and coordinates offset risks all over the firm to manage and integrate all risks holistically. As a result, this paper provides a conceptual and theoretical framework for how corporations use risk management to lower the cost of capital and improve sustainable development in the solar PV industry. The suggested theoretical and conceptual framework, supported by stakeholder and legitimacy theory, provides a foundation for empirically validating the entangled interaction between the relevant variables. It is advocated that measuring variables such as enterprise risk management, financial performance, and sustainability performance be based on previous research and frameworks and recommendations produced by major organizations. The purpose of this paper is to guide Malaysian solar PV companies in the implementation of sustainability and risk management. Keywords: enterprise risk management, sustainability, solar PV, financial performance

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Section: Discussionmentioning

confidence: 99%

Efficacy of Enterprise Risk Management in Enhancing Sustainability and Financial Performance in the Solar PV Industry: A Conceptual Framework

Mahwish,

Lai,

Kashif Shad

et al. 2023

KSS

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“…Applying regression as the estimation technique, the results showed that market risk management positively and significantly affects financial performance. Muhammad et al, (2022), studied the effect of ERM on the cost of capital which is considered a measure of financial performance given its effect on profitability. Measures of both independent and dependent variables were obtained from secondary sources; ERM was measured using S&P ERM scores while cost of equity and cost of debt were obtained from Thomson Reuters Datastream.…”

Section: Empirical Reviewmentioning

confidence: 99%

Effect of Enterprise Risk Management on the Profitability of Insurance Companies in Nigeria

Soladoye,

Dominic,

Gambo

et al. 2024

EJAAFR

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Nigeria's insurance industry, despite contributing less than 1% to Nigeria's GDP, is considered crucial to the economy as it controls large sums of money and protects businesses from diverse risks. However, concerned about business failures in the insurance industry, the National Insurance Commission in 2012, mandated the adoption of Enterprise Risk Management (ERM) by all insurance businesses in Nigeria to address this issue and to deter future business failures. This research work studied the effect of ERM on the profitability of Nigerian insurance businesses over a 10-year period, encompassing the two years prior to, and eight years following the introduction of ERM. ERM is studied from two perspectives: ERM adoption and ERM implementation. Profitability, the dependent variable was measured by Return on Assets while ERM adoption was measured using Chief Risk Officer (CRO) and Board Risk Committee Composition (BRCC. Enterprise Risk Management Index (ERMI) measured ERM implementation. Firm Size (F. SIZE) represented by Total Assets and Firm Age (F.AGE), represented by total years of operations, served as control variables. Using the expo-facto research design and the census sampling technique, relevant secondary data about all 37 insurance companies that were in operation during the study period (2010 – 2019) was collected from published financial statements and the regulator’s reports. The multiple regression analysis revealed that while CRO and BRCC contributed positively to ROA but not at a statistically significant level, ERMI had a negative effect on ROA. The research confirms that ERM adoption only is not sufficient to influence profitability. For better results from ERM, an industry-wide review of implementation practices by NAICOM is recommended.

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“…The convenience of BNPL, the flexibility in repayment terms, and the ease of accessing credit through this system can influence consumers to embrace and adopt this innovative payment method. DOI theory developed by Everett Rogers, explores how new ideas, innovations, or technologies spread and are adopted within a social system [15], [16]. This theory identifies five key elements that influence the rate of adoption: relative advantage (perceived benefits over existing alternatives), compatibility (fit with existing values and needs), complexity (ease of understanding and use), observability (visibility of results), and trialability (opportunity to experiment with the innovation).…”

Section: Theoretical Frameworkmentioning

confidence: 99%

A Proposed Framework for Assessing BNPL (Buy Now, Pay Later) Adoption and its Impact on Consumers' Buying Behavior

Mukhtar,

Binti Ahmad Tamrin,

Kashif Shad

et al. 2023

KSS

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Buy Now, Pay Later (BNPL) services allow retailers and enterprises to offer their consumers installment-based payment plans to help them manage their personal finances. As such, this research aims to examine the impact of BNPL services on consumer buying behavior. BNPL services are segmented into a convenient payment system, flexible repayment system, and accessible credit system. The study proposed primary data to be collected from Malaysian youth aged between 18 to 40 years through questionnaire. Partial Least Square-Structural Equation Modeling (PLS-SEM) is proposed to analyze the data. The conceptualized framework is underpinned based on the Diffusion of Innovation (DOI) theory that suggests that the adoption of BNPL services has a significant and positive impact on consumer buying behavior. This study will provide insights for regulators and industry players to decide BNPL’s future and to enhance its availability and adoption among the consumers. Keywords: BNPL services, convenient payment system, flexible repayment system, and accessible credit system, diffusion of innovation theory

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The Relationship between Enterprise Risk Management and Cost of Capital

Cited by 7 publications

References 0 publications

Efficacy of Enterprise Risk Management in Enhancing Sustainability and Financial Performance in the Solar PV Industry: A Conceptual Framework

Efficacy of Enterprise Risk Management in Enhancing Sustainability and Financial Performance in the Solar PV Industry: A Conceptual Framework

Effect of Enterprise Risk Management on the Profitability of Insurance Companies in Nigeria

A Proposed Framework for Assessing BNPL (Buy Now, Pay Later) Adoption and its Impact on Consumers' Buying Behavior

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