This document presents a term paper exploring the relationship between organizational culture and the implementation of enterprise risk management (ERM). It begins with an introduction explaining the importance of ERM and how organizational culture can impact ERM implementation. A literature review defines key terms and discusses research showing that organizational culture plays a critical role in ERM efforts and is one of the top barriers to effective ERM implementation. The conclusion is that organizational culture has a significant impact on ERM implementation based on previous studies.
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Term paper - impact of organizational culture on enterprise risk management (erm) implementation
1. Impact of Organization Culture
on
Implementing Enterprise Risk Management
A Term Paper Presentation By:
Imran Jamil M. Mohsin Aslam
FA16-RPM-005 FA16-RPM-008
Dec 30, 2016
4. Our Term Paper explores;
the relationship between Enterprise Risk Management (ERM)
Implementation and Organizational Culture
Introduction
5. 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
6. 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
7. 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
8. 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
11. 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
12. 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
13. 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
14. 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
15. 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
17. 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
21. 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