Adoption of enterprise risk management erm practices in the zimbabwean banking sector

Abstract

Corporate failures that occurred in the mid-1990s as well as the global financial crisis that unfolded in the US in 2007 and subsequent banking crises in many countries underscored the need for banking institutions to develop and implement robust risk management systems and controls to prevent the occurrences of such crises. Enterprise risk management (ERM) has emerged as the best practice approach that provided banks with means for mitigating and controlling risks giving rise to such financial crises. Attempts have been made to find out the factors driving the implementation of ERM and the majority of these studies had conflicting newlineconclusions on the effect of some of these factors. Further, weaknesses were noted in variables used by researchers as proxies for ERM adoption. It was noted that several studies used the appointment of a chief risk officer as a variable representing ERM adoption while a number of other researchers focused on surveys or renowned frameworks such as COSO to ascertain the extent of adoption of ERM. These approaches however, had shortcomings. This study therefore sought to address some of the above gaps in literature. The purpose of this study is to determine the degree of adoption of ERM newlinepractices as well to examine factors (adequacy of risk governance structure, newlinequality of organizational culture, intensity of regulatory environment and size of the bank) influencing the adoption and implementation of ERM by banks in Zimbabwe. A mixed method approach was utilized in this study. The population of the study comprised of 18 commercial banks which have been operating in Zimbabwe since the adoption of the multi-currency system in 2009. Respondents for the study were selected using the purposive sampling approach. This was to ensure the respondents had the right experience and expertise to answer questions on enterprise risk management practices newlinewithin their respective banks.