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Measuring enterprise risk management implementation: A multifaceted approach for the banking sector

Author

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  • Adam, Mukhtar
  • Soliman, Alaa. M.
  • Mahtab, Nehal
Abstract
This paper contends that the use of alternative constructs as Enterprise Risk Management (ERM) measures has made a partial contribution to the different and contradictory results provided by various empirical studies. It further argues that the comprehensive nature of Enterprise Risk Management implies that its adoption and implementation affect different aspects of firms and, therefore, the most appropriate construct to measure it should be equally comprehensive in order to capture all possible signals, outputs and effects from the features of a firm. Secondly, the specialised nature of banking operations and the associated risk necessitates risk measures that suit the peculiarities of the sector and in this study we have proposed banking sector specific ERM model. In this regard, we propose a comprehensive methodology and multifaceted approach to determining ERM measures for the banking sector, taking cognisance of the various components of ERM and the specific needs of the sector. In our proposed comprehensive methodology for determining ERM measures for the banking sector, we combined two important models: the ERM model for the banking sector and the CAMELS model for assessing the performance of banks. The integration of these two models provides a comprehensive and all-encompassing approach for determining ERM measures for the banking sector. Our model is novel and offers a significant contribution to the literature of bank risk management. Our model provides a comprehensive risk management framework for bank executives, bank risk managers, the board members of banks, central banks and the authorities responsible for financial sector stability.

Suggested Citation

  • Adam, Mukhtar & Soliman, Alaa. M. & Mahtab, Nehal, 2023. "Measuring enterprise risk management implementation: A multifaceted approach for the banking sector," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 244-256.
    • Handle: RePEc:eee:quaeco:v:87:y:2023:i:c:p:244-256
    DOI: 10.1016/j.qref.2021.01.002
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    References listed on IDEAS

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    1. Müzeyyen Çiğdem Akbaş, 2024. "Measuring the impact of enterprise risk management on performance, value, and risk indicators of Borsa Istanbul XBANK companies with data mining prediction models," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-19, December.

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    More about this item

    Keywords

    ERM; CAMELS; Banking sector;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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