Enterprise Risk Management Culture and Strategy: A Conceptual Alignment

Abstract

Risk culture has become a trending topic among scholars and practitioners, especially in the aftermath of the 2007-2009 economic crisis. However, its effects on organizational performance remain questionable. Therefore, through literature review, this article develops a concept that encapsulates an ideal integration of enterprise risk management (ERM) culture and strategy to guide organizations in their pursuit for enhanced performance. Although the positive contributions of globalization and technology are undeniable, they have equally stimulated an array of new and complex risks across sectors. Moreover, extant literature in this research domain reveals that the collapse of big companies during the recent economic crisis was exacerbated by a weak risk culture, characterized by reckless risk-taking in pursuit of short-term earnings, neglecting the virtues of a strong ethical risk culture. Risk culture is hailed as a fundamental component of an effective risk management program. Against this backdrop, based on the balanced scorecard, this article presents a conceptual alignment of ERM and strategy. This article discusses the process and potential benefits of this alignment; furthermore, it provokes scholarly engagement on the nature and scope of this configuration.