Open AccessThe Effect of Enterprise Risk Management (ERM) Implementation on SMEs Performance in Malaysia
Author(s) -
Anoorat Eh Poon,
Nur Hafizah Roslan,
Jaizah Othman,
Aimi Anuar,
Maryam Yousefi Nejad
Publication year - 2022
Publication title -
malaysian journal of social sciences and humanities
Language(s) - English
Resource type - Journals
ISSN - 2504-8562
DOI - 10.47405/mjssh.v7i4.1460
Subject(s) - enterprise risk management , business , variables , descriptive statistics , profitability index , regression analysis , business risks , accounting , identification (biology) , reliability (semiconductor) , risk management , operations management , marketing , risk analysis (engineering) , finance , statistics , economics , power (physics) , botany , mathematics , physics , quantum mechanics , biology
This study aims to identify the effect of Enterprise Risk Management (ERM) implementation on SMEs performance in Malaysia. SME performance is used as a dependent variable, whereas eight (8) elements of ERM are based on the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework as the independent variables. Primary data were administered through questionnaires among 312 respondents from the main contributing sectors of SMEs; agriculture, construction, mining and quarrying, services and manufacturing across all states in Malaysia. This study employed six (6) analyses, including descriptive statistics, normality, reliability, correlation, multiple regression analysis and hypothesis testing. Results from correlation analysis indicated that the independent variables represented eight (8) elements of ERM, illustrating a positive, strong correlation with the dependent variable. Multiple regression analysis showed that ERM has a positive effect on SME performance. However, only three (3) of the ERM elements, namely event identification, risk assessment, and risk response, significantly affect SME performance. The information was gathered from a questionnaire of 312 respondents and there are only 177 respondents think that their company implemented ERM, whereas the remaining 135 do not think their company implements ERM. An ERM implementation in SMEs is expected to be able to find solutions to minimise the risks that SMEs may or may not face. Effective risk management can enable SME owners, managers and employees to achieve business objectives. As a result, risk management enhances the value of the business, increases profitability, and improves the overall performance of SMEs.