From ESG Risk Governance to Firm Performance: Measuring the Quality of Corporate Risk Management

This article examines corporate risk management as a measurable and economically relevant driver of firm performance, with a specific focus on the integration of environmental, social, and governance (ESG) risks into the risk management process. We develop a Composite Risk Management Index (CRMI) based on a structured questionnaire that captures the frequency, depth, and integration of risk management practices, including explicit treatment of ESG-related risks. Using cross-sectional econometric models on a sample of medium-sized and large companies, we analyse the relationship between CRMI and multiple performance and stability indicators, including return on equity, return on assets, operating cash-flow efficiency, and financial stability. The results indicate a statistically and economically significant association between higher risk management maturity and superior business performance across all dimensions. The findings suggest that ESG risk governance, when embedded within an integrated risk management framework, contributes to value creation rather than representing a purely compliance-driven activity. From a sustainability perspective, the results demonstrate that ESG-integrated risk management enhances long-term corporate resilience and supports sustainable value creation. To support practical interpretation, the study is complemented by a web-based application that enables real-time self-assessment of risk management quality under conservative methodological assumptions.