Analyzing the Role of Risk Awareness in Enterprise Risk Management
- 1 March 2018
- journal article
- research article
- Published by American Accounting Association in Journal of Management Accounting Research
- Vol. 30 (2), 241-268
- https://doi.org/10.2308/jmar-52084
Abstract
This study examines the relationship between five enterprise risk management (ERM) components and their influence on the effectiveness of ERM. The study particularly focuses on the role of risk awareness as an ERM component within the interplay of other formal ERM components. The five ERM components result from a factor analysis applied on a list of risk management (RM) practices in non-financial firms. Based on survey data from 118 companies, I find evidence supporting an indirect effect of risk awareness on RM effectiveness. My analyses support that the use of RM tools strengthens the relationship between risk awareness and RM effectiveness, but I only find inconclusive evidence supporting a direct association between risk awareness and RM effectiveness. As antecedents of risk awareness, I find support for both organizational environment and reporting processes. Moreover, risk awareness carries the effects of organizational environment and reporting processes to RM effectiveness. This study shows empirically that risk awareness is a vital cultural component in a firm's ERM system. It thus contributes to existing research in management accounting and control by providing insights into the role of risk awareness as a concept related to other ERM components.Keywords
This publication has 68 references indexed in Scilit:
- Is performance measurement and management fit for the future?Management Accounting Research, 2014
- Performing risk and the project: Risk maps as mediating instrumentsManagement Accounting Research, 2013
- Enterprise risk management and continuous re-alignment in the pursuit of accountability: A German caseManagement Accounting Research, 2013
- Risk and risk management in management accounting and controlManagement Accounting Research, 2013
- The Impact of Hedge Accounting Rules on Enterprise Risk Management Adoption Practices by MultinationalsSSRN Electronic Journal, 2011
- The effect of comprehensive performance measurement systems on role clarity, psychological empowerment and managerial performanceAccounting, Organizations and Society, 2008
- Integrated Risk Management and the Role of the Risk ManagerRisk Management and Insurance Review, 1999
- Strategic assets and organizational rentStrategic Management Journal, 1993
- The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations.Journal of Personality and Social Psychology, 1986
- On the Exact Variance of ProductsJournal of the American Statistical Association, 1960