An investigation into the impact of enterprise risk management (ERM) on corporate performance of manufacturing firms in Zimbabwe

Abstract

In consecutive years notably, 2012, 2013 and 2014, manufacturing organisations in Zimbabwe had poor financial performances which were as a result of poor risk management structures. It was the researcher’s hunch that the phenomenon was not accidental but the impact of risk management on corporate performance could be identified and addressed at the institutional level. The researcher’s personal hunch gave rise to four main objectives that sought to reveal the impact of Enterprise Risk Management on corporate performance. Literature has shown that Enterprise Risk Management and corporate performance are indeed interlinked and firms that adopt such frameworks achieve visible results consistent with the literature.

With a view to establish this relationship a sample of twenty two manufacturing firms were selected. Data were collected through the use of questionnaires and the Statistical Package for the Social Sciences, SPSS was used to analyse the data. The researcher opted to use the survey design to collect data from a stratified sample of the designated population. Risk Management was characterized mainly as a framework that guides a common approach across the enterprise and as such risks have to be communicated in terms of their impact on the business and moreover there is overall accountability and ownership of every risk. The study revealed that there is a positive and significant relationship between risk management and corporate performance.

With the above results it can be noted mere adoption of Enterprise Risk Management for the sake of complying with regulation imposed by the regulators will never improve the financial performance of an organisation. The researcher therefore recommends that the board and top management commit themselves to avoid sudden surprises.