Enterprise Risk Management: Insights from a Textile-Apparel Supply Chain

Enterprise Risk Management: Insights from a Textile-Apparel Supply Chain

Karen K. L. Moon (Seoul National University, Seoul, Republic of Korea), Phyllis L. L. Mo (City University of Hong Kong, Hong Kong, China) and Rita L. Y. Chan (BNU-HKBU United International College, Zhuhai, China)
Copyright: © 2014 |Pages: 13
DOI: 10.4018/ijrcm.2014040102
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Abstract

The authors investigate strategic measures companies adopt to combat and manage risks in order to survive and grow in an unstable economic environment. Based on in-depth interviews with senior staff from six Hong Kong-based successful enterprises in the textile and clothing industry, they find that companies have adopted various enterprise-wide, holistic, and integrative approaches to effectively address and manage risks. Also found was that the use of a formal approach to manage risks by a company at a different stage of the Enterprise Risk Management (ERM) maturity continuum is affected by its size, scope of operations, and legal structure. The findings from this study enhance the understanding of the relationship between organization structure and risk management.
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Introduction

Today’s highly competitive and increasingly uncertain business environment offers both risks and opportunities for companies in different industries and countries (Meschi, 2005; Rao & Marie, 2007). In recent years, severe natural disasters and disruptions, as well as a string of business debacles, have underscored the immediate need for companies to adopt a holistic, proactive, and integrated approach to risk management (Tomlin, 2006; Kleindorfer & Saad, 2005; Park, Hong, & Roh, 2013). The ultimate strategic goal of successful protection and creation of shareholder value has made effective risk management a central concern for many organizations (Frigo & Anderson, 2011; Hendricks & Singhal, 2008; Fiegenbaum & Thomas, 2004; Foss, 2010).

Enterprise risk management (ERM), a systematic approach to identifying, assessing, prioritizing, and controlling risk exposures and the integral and cumulative effects throughout an organization in a coordinated, consistent manner, has emerged as a new paradigm for organizations to manage risks (Bowling & Rieger, 2005; Rogachev, 2008; Muzzy, 2008). Research advocating ERM indicates that implementing ERM allows an organization to not only mitigate risks, but also to benefit from the ‘upside of risk’ by creating synergies between different risk management activities (The Association of Insurance and Risk Managers [AIRMIC], 2010; Beasley & Frigo, 2007; Abrams, von Känel, Müller, Pfitzmann, & Ruschka-Taylor, 2007; Cumming & Hirtle, 2001). Indeed, as shown in a recent survey study by Beasley, Branson, and Hancock (2012), ERM is growing in significance in all types of organizations.

Given intensive globalization and outsourcing, textile and clothing companies now face an ever-growing range of uncertainties embedded in the areas of markets, operations, compliance, finance, and/or supply chain management (Yi, Ngai, & Moon, 2011; Dillon & Mazzola, 2010; Lau & Moon, 2008). Some typical risk examples include more new players in the global market space, further reductions in prices, more product customization, shorter product life cycles, complex supply chain relationships, adverse trends in exchange and interest rates, uncertain developments in both the local and global economies, natural catastrophes, and global terrorism (Christopher, Lowson, & Peck, 2004; Warburton & Stratton, 2002). In addition, the abolition of trade barriers, such as the Multi Fiber Agreement, and the increase in the use of complex global supply networks have fundamentally transformed the textile and clothing industry, creating an extremely challenging and risky business environment for its players (Appelbaum & Christerson, 1997; Jones & Hayes, 2004; Moon, Leung, Chang, & Yeung, 1997; Taplin & Winterton, 2004).

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