Term paper - impact of organizational culture on enterprise risk management (erm) implementation

Impact of Organization Culture on

Implementing Enterprise Risk Management

A Term Paper Presentation By:

Imran Jamil M. Mohsin AslamFA16-RPM-005 FA16-RPM-008

Dec 30, 2016

Introduction

Literature Review

Conclusion

Structure of Today’s Presentation

• Why we have done it? • How we have done it?

• What we have done?• What we have found?

Introduction

Literature Review

Conclusion

Our Term Paper explores;

the relationship between Enterprise Risk Management (ERM) Implementation and

Organizational Culture

Introduction

Why Enterprise Risk Management (ERM)?• Risk Management focuses on reducing the probability &

impact of negative events and increasing the probability & impact of positive events

• Whereas ERM expand this concept across the entire entity and provide a reasonable assurance to top management regarding the achievement of entity objectives

• Since the financial crisis in 2008, importance of robust and effect ERM in organizations have been increased significantly and Organizations are forced to enhance their focus on risk management

Introduction

Why Organizational Culture?• Among all factors which can effect the

implementation of Enterprise Risk Management in an organization, Culture plays the most significant part

Introduction

The Problem?• In the current competitive business world, Organizations are in a

continuous state of “change”, trying to be more dynamic, flexible, and ready to respond to any upcoming new requirement

• To respond to any future changes and provide assurance to top management about achievement of objectives, organizations are rapidly working on Enterprise Risk Management (ERM)

• The desire results from ERM can only be achieved through its effective implementation

• But the Implementation of ERM depends upon several factors in an organization and through this paper, we intend to find out the impact of only one significant factor on ERM implementation i.e. Organizational Culture

Introduction

Research Question:• Question # 01:Does Organizational Culture has any impact on implementation of Enterprise Risk Management (ERM)?

• Question # 02:Are there any dimensions which can be influenced by Organizational Culture to impact implementation of Enterprise Risk Management (ERM)?

Introduction

Introduction

Literature Review

Conclusion

Structure of Today’s Presentation

• Why we have done it? • How we have done it?

• What we have done?• What we have found?

Introduction

Literature Review

Conclusion

Basic definitions

What is Risk?

The scholars and professional organization mentioned about risk in similar aspects;

• According to Knight (1921),“Risk is uncertain events that may happen in the future but can

estimate the likelihood of its occurrence”.

Moreover,• According to COSO (2004), “Risk is events that results in a negative by diminish value creation or

existing value of organization”.

Literature Review

Basic definitions

What is Enterprise Risk Management (ERM)?

(COSO) defines ERM as;

• A Process, effected by Board of Directors, Management & personnel

• Applied in Strategy Setting and across the enterprise

• Designed to identify Potential Events that may affect the entity

• Manage risk to be within its appetite

• Reasonable assurance regarding the achievement of entity objectives

Literature Review

Basic definitions

What is Organization Culture?

• According to Alvesson and Berg, (1993)“Culture is sometimes perceived as the softer side of

an organization”

• Moreover, Schein (1992) proposes that, “Culture is one of the most powerful influencers on organizational decision making and strategy”

Literature Review

Organization Culture & ERM

• Organizational culture plays a critical role in key areas such as, how major initiatives are implemented?

• How quickly the organization can react to market changes?

• Whether or not the organization can successfully navigate major

changes in the business environment? (Kimbrougha, 2009)

According to (Miccolis, 2003);

Organizational culture among the top barriers to ERM implementation, encountered by approximately half of survey respondents”

Literature Review

Organizational Culture & Organization’s Management

(Koompai, 2010) explain this as,“Organizational culture is one of contextual factors

which has important role to the success of management in organization”

Moreover Muralidhar (2010) found that, “Organizational Culture is one of challenges to

implement ERM”.

Literature Review

Organizational culture and Organization’s management

Literature Review

Concept of Risk Culture

Risk culture is the system of values and behaviors present in an organization that shapes risk decisions of management and employees.

According to (Cendrowski and Mair, 2009),“A supportive culture is crucial to the success of ERM

efforts”

Literature Review

Research Model

Literature Review

Introduction

Literature Review

Conclusion

Structure of Today’s Presentation

• Why we have done it? • How we have done it?

• What we have done?• What we have found?

Introduction

Literature Review

Conclusion

By the meta-analysis of previous research and practitioner studies, it is evident that;

Organizational Culture has a significant impact in Implementation of Enterprise Risk Management (ERM), and therefore

regarding us one of the top barrier in effective implementation of ERM

Conclusions

Any questions…?