Strategic Change in Enterprise Risk Management

• Author: Ruchi Agarwal,Jake Ansell
• Date: 01 July 2016
• Published date: 01 July 2016
• DOI: http://doi.org/10.1002/jsc.2072

RESEARCH ARTICLE

Strat. Change 25: 427–439 (2016)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2072

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2072

Strategic Change in Enterprise Risk Management1

Ruchi Agarwal

University of Edinburgh Business School, UK

Jake Ansell

University of Edinburgh Business School, UK and ammasat University, ailand

Four emerging strategies of enterprise risk management (ERM) – ‘Rudimentary,’

‘Anticipatory,’ ‘Resilient,’ and ‘Transformation’ – are identied based on strategic

change of ERM.

ere have been rising concerns among executives and boards in recent years,

dealing with the complexity, uncertainty, and ambiguity present in current dynamic

markets (Frigo and Anderson, 2011a; Klinke and Renn, 2002). Enterprise risk

management (ERM) has been adopted as an acceptable practice to deal with vari-

ability in market situations, and has become a signicant part of the umbrella

term ‘governance risk and compliance’ (GRC) (Renn and Walker, 2008). ERM

provides a framework for corporates to balance downside risks and to exploit the

opportunities (upside risks) in a holistic manner. Overall, it supports the achieve-

ment of organizational objectives by focusing on the interrelatedness of risks

(COSO, 2004).

ere is no standard universal approach prescribed by any regulator or profes-

sional advisory body to implement ERM, though some frameworks have been

suggested (Frigo and Anderson, 2014; Purdy, 2010). Companies need to think

‘out of the box’ and customize the existing framework suggested by various advi-

sory bodies such as the Committee of Sponsoring Organisations of the Treadway

(COSO), ISO 31000 (2009), and credit rating agencies such as Standard & Poor

(S&P) or devise new approaches according to their own organizational objectives.

ERM is still evolving, and the standardization of ERM as such is in an initial

phase and perhaps may hamper innovation (Bromiley et al., 2014; Frigo and

Anderson, 2014; Mikes and Kaplan, 2015).

ere are few contributions in the literature on ERM strategies (see, e.g.,

Klinke and Renn, 2002), although its execution is critical in the nancial world.

All nancial companies – such as banks, insurance rms, and also the companies

listed on the New York Stock Exchange (NYSE) – have to follow ERM to some

1 JEL classication codes: L10, O57.

A learning process highlights

decision criteria in risk

acceptance/rejection using

resilient strategies.

Despite differing business

environment needs, companies

need to adopt transformation

strategies to implement resilience

strategies such as understanding

of risks, risk reporting, and risk

culture, and to integrate large‐

scale change in the business.

Good risk governance can be

promoted with a ‘rational’ lens or

a combination of ‘rational and

learning’ lens with ‘cognitive’ lens

of change.