Enterprise-Wide Risk Management

Enterprise-Wide Risk Management

In essence, EWRM drives value creation through Earnings, Growth, Capital, Efficiency, Volatility of

Earnings & Capital, Management Competence and Shareholder Value. Thus, EWRM is a multi-step

process that involves both the upside and downside impact of all potential sources of risk and also

serves as an integrated enterprise-wide correlation-adjusted approach of managing risks (Hoyt &

Liebenberg, 2006).

As a value-added tool, EWRM provides an essential framework for better management of shareholder

value. In addition, EWRM provides the vital mechanism to business enterprises for better

understanding, management and communication of risk appetite and potential exposures facing the

business entities on the whole. Also, EWRM is not just about responsibilities. It is primarily about the

way how people work and the way how they relate to the strategy and growth in order to achieve the

company's objective (Pickett, 2006).

It is rather important to note that the underlying concept of EWRM is to enhance

shareholders/stakeholders value and this relates to each type of organization whether profit, nonprofit,

or government agency, provides value for its stakeholders (COSO, 2003). This had been

stressed in the definitions of EWRM and in the EWRM concept itself. Miller (1992), Deloach (2000),

Stroh (2005) and Panning (2006) all agreed that the function of EWRM is to drive value creation,

either in terms of financial and non-financial aspects.This research work examines the adoption and eventual implementation of Enterprise-Wide Risk

Management (EWRM) as a value-added tool in enhancing the economic value of business enterprises.

In this respect, the main objective of such a study is to find out the extent to which the specific

corporations in selected sector of the Malaysian industry have actually implemented the increasingly

popular EWRM program and also to assess the value implications of this program. This research work

undoubtedly provides a valuable insight of EWRM as an important concept of managing risks on an

enterprise-wide basis among major corporations in Malaysia. For this, a qualitative approach

(including personal interviews) was adopted and reference was also made on annual reports available.

2.1. Research Methods

In order to ensure this research is in line with the objectives, the following features explain the

methodology used with some relevant criteria in selecting the participants for this study.

2.1.1. Research Criteria

The main criteria set for selecting the twenty (20) companies for this research work are the companies

which were selected that meet the diverse varieties of Main Board companies in the Malaysia Bourse

[formerly known as Kuala Lumpur Stock Exchange (KLSE)]. Such diversities include Consumer

products, Industrial products, Trading and services, Construction, Property, Mining and Plantation. In

addition, these companies comply with some criteria of major corporations as defined by Yazid

(2001) whereby these companies have branch(s) or subsidiary(s) overseas or joint venture in with

overseas partners.

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Also, these companies are exposed to several risks, among which include strategic risks, operational

risks, credit risks and market risks. Importantly, these companies are more likely to respond to the

survey. More importantly, these companies were carefully selected based on their good reputation and

are well established including data on these companies which are easily obtainable.

2.1.2. Data