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Enterprise Risk Management Incentives and Practices in three Danish companies
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The purpose of this thesis is to provide an academic contribution to the subject
Enterprise Risk Management. This is done by carrying out a study concerning
today’s use of ERM in larger Danish companies and identification of structures
that influence the choice of developing an ERM process in the company. The
underlying assumption of the thesis is that such structures exist, and the objective
is to identify them by following a scientific method.
The paper begins with a definition of the study area and the methodological
approach to the study. Hereafter existing theory including applicable frameworks
is examined to set up the theoretical framework for the study. Following
this, the study method is explained and finally, the findings and conclusion are
stated.
Enterprise Risk Management is a management tool focusing on risks, operational
as well as financial and strategic, related to a company across the entire
organization and hierarchical level. The idea is to focus on risks related to the
achievement of given objectives and to manage them in a structured way.
Based on the theoretical framework of ERM and a preliminary study, the analysis
is carried out as a qualitative case study within three larger Danish companies.
The analysis concerns the two dimensions mentioned, the use of ERM today
and incentives for developing an ERM process in the company. The part treating incentives
are carried out by guidance from seven research propositions prepared
on the basis of existing theory and the preliminary study.
The analysis shows that none of the case companies follow ERM frameworks
stringently in their risk management process. When implementing ERM, they
take the existing frameworks and modify them to fit the organization in which
they must apply. Components of the frameworks that are considered as nonvalue
adding are ignored and only the beneficial components are used.
The following structures are identified to constitute the incentives for the
companies to implement ERM. Several of them are context specific, meaning
that they are only identified in one single case. Others are identified in all cases.
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1. The board and management’s attitude towards ERM
2. Compliance requirement concerning risk management
3. The company’s growth rate
4. Stakeholder demands
5. Negative events
6. The business
The study also showed two other mechanisms, even though they have not
been directly identifiable. They are the culture of the organization and the ability of
fulfilling the formulated strategy.
It is the author’s hope by preparing this paper, that the subject will obtain more
attention in Danish academic circles. For that purpose, suggestions for further
research are outlined in the end of the thesis.