The measurements and performance of enterprise risk management: a comprehensive literature review

Global economic crises and complexities in the business environment have flawed the traditional risk management system. These have provided lessons to business leaders and enhanced the popularity of Enterprise Risk Management (ERM). ERM is the holistic approach to managing the overall risks of an organisation to achieve its strategic goals. Despite its relevance, the question about the appropriate measurement for ERM and the performance of ERM remains. This study provides a comprehensive and systematic literature review on the measurement and performance of ERM. Google Scholar was the primary search tool for ERM literature from 2001 to 2020, and papers listed in SCImago journal ranking were discussed. According to the review, there is no specific approach to measuring ERM; hence, scholars rely on different proxies. Most studies rely on secondary sources, particularly the Chief Risk Officer’s appointment as a simple ERM proxy. This approach is widely adopted in the literature due to the difficulty in assessing ERM information. This paper recommends that further studies on the empirical measurement of ERM should rely on both primary and secondary data as they complement each other. This will provide more insight and allow more factors to be considered for a robust ERM measurement. In terms of performance, the ERM literature reveals mixed findings; however, there is enough evidence to support the assertion that ERM enhances firm profitability and value. Also, an advanced level of ERM implementation significantly improves firm performance. We suggest that scholars consider examining the ERM-performance relationship in emerging economies, as most of these studies centred on the US and European economies. In addition, future studies should consider investigating the non-linear relationship and how moderating factors affect the ERM-performance relationship. Firms must also strengthen their ERM system, as a higher level of ERM implementation improves performance.