A conceptual model for IT-enabled enterprise risk management in financial organisations

Abstract

The managing of risks and uncertainties in today's competitive financial services industry is central to the survival and performance of financial organisations. Enterprise risk management (ERM) is an emerging approach to managing risks across different business functions in an organisation that represents a paradigm shift from specialized, silo-ed approaches in managing specific risks. This paper provides a conceptual model proposing information technology capability and top management commitment as critical antecedents in building IT-enabled ERM capability, which will subsequently lead to better organisational performance. Information technology is regarded as a key enabler of enterprise risk management strategies that can integrate risk management into enterprise-wide business processes, giving rise to IT-enabled ERM capability. This capability is conceptualised as a higher-order capability comprising of risk measurement, risk control and risk monitoring capabilities. Top management commitment is also identified as a key complementary enabler of IT-enabled ERM capability. The development of a structural model to elucidate the ERM capability building process provides significant research and managerial implications for addressing enterprise risks in financial organisations.