Enterprise Risk Management: What Opportunities for the Banking Sector?

Risk management has become increasingly important for companies in all sectors. Many risk management frameworks help firms compete better in the market. One of the most widely used is the Enterprise Risk Management Committee of Sponsoring Organizations (ERM COSO) model, considered a reference for all types of companies. ERM represents a new approach to identify, assess and manage the risks that may interfere with an organisation’s operations and objectives. The interest in ERM, supported by its implementation, has increased, following rigorous regulatory requirements and emerging risks. The ERM framework allows managing enterprise risk in a coordinated way and in aggregation across the organisation. The risk management function has evolved into a flexible system, capable of respecting each company’s needs. This function is implemented by formulating strategies consistent with a corporation’s risk appetite and goals to enable value creation. The ERM framework has improved business results, decreasing the volatility of earnings and stock prices, reducing costs and increasing efficiency, which can enhance firms’ performance and value. In this paper, we explore the ERM framework’s level of integration in the financial system and investigate the relation between ERM and performance by conducting an explorative empirical analysis on a sample of listed international financial institutions. This contribution has practical implications, offering market participants insights into how ERM can affect financial intermediaries’ performance.