Enterprise risk management: a capability-based perspective

Yevgen Bogodistov and Veit Wohlgemuth

Journal of Risk Finance, 2017, vol. 18, issue 3, 234-251

Abstract: Purpose - The purpose of this study is to enhance the existing enterprise risk-management (ERM) theory by introducing both a resource-based view and a dynamic capability perspective. These strategic management concepts might resolve several theoretical shortcomings in the field of risk management. The concept of risk-management capabilities is proposed as an explanation of a firm’s risk resilience. Design/methodology/approach - This paper is conceptual in nature. For illustrative purposes, the paper refers to practical examples. Findings - First, the resource-based view provides a framework that helps to set priorities in risk management. Second, the dynamic capability perspective illustrates how firms can handle unforeseen events. Third, it is proposed that dynamic capabilities are needed to allow a constant reassessment of the impact of specific resources and, consequently, of ERM priorities. Fourth, a risk-management capability, as an integral part of a dynamic capability, allows firms to develop risk resilience in turbulent environments. Research limitations/implications - This paper develops an enhanced framework for ERM within specific boundary conditions. It shows how priorities at the strategic level are to be set, and how these priorities influence the operational level of risk management. Practical implications - The framework provides clear guidelines on setting priorities in ERM and implementing a risk-management process within firms. Originality/value - This study contributes to the theoretical literature on ERM by enhancing it through a new framework. The resource-based view and dynamic capability perspective benefit through insights from risk-management literature.

Keywords: Dynamic capabilities; Enterprise risk management; Resource-based view; Risk-management capability; Risk-management theory; Risk resilience (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:jrf-10-2016-0131

DOI: 10.1108/JRF-10-2016-0131

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