Knowledge Management in Support of Enterprise Risk Management

Knowledge Management in Support of Enterprise Risk Management

Eduardo Rodriguez (University of Wisconsin – Stevens Point, USA) and John S. Edwards (Aston University, UK)
Copyright: © 2019 |Pages: 24
DOI: 10.4018/978-1-5225-5427-1.ch014

Abstract

This chapter examines possible relationships between knowledge management constructs related to knowledge sharing and two risk management concepts: perceived quality of risk control and perceived value of enterprise risk management. From a literature review, relationships with eight knowledge management variables covering people, process, and technology aspects were hypothesized. The results showed that the perceived quality of risk control is significantly associated with four knowledge management variables: perceived quality of risk knowledge sharing, perceived quality of communication among people, web channel functionality, and risk management information system functionality. However, the relationships of the knowledge management variables to the perceived value of enterprise risk management are not significant. The authors conclude that better knowledge management is associated with better risk control, but that more effort needs to be made to break down organizational silos in order to support true enterprise risk management.
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Introduction

The separation between Knowledge Management (KM) and Risk Management (RM) is part of current organizational reality. The aim of this research is to study how KM concepts may help improve RM and help to turn it into true Enterprise Risk Management (ERM). It builds on previous work on knowledge-related constructs within RM (Rodriguez & Edwards, 2010). ERM implementation has evolved and studies show that organizations have expectations of improving the ERM process to perform better. Callahan and Soileau (2017) identified that organizations with ERM process in higher maturity levels have a better operational performance than their peers in the market. Fraser and Simkins in 2007 presented the misconceptions of ERM that reduced the implementation of the ERM process, in Fraser & Simkins (2016) presented solutions to the challenges and misconceptions. These solutions are based on the ERM best practices study. These solutions are associated with knowledge management practices where knowledge transfer in policy and integration of ERM in strategic planning, committees conversations, performance evaluation and development of common language around ERM terms.

Bromiley et al. (2015) indicated the importance of studying several aspects of ERM form the management perspective mainly on ERM adoption and capacity to implement ERM in organizations. In this article, we consider the relationships between KM variables related to knowledge sharing, and two RM variables: perceived quality of risk control (representing the operational level of RM) and perceived value of the ERM implementation (representing the strategic level). Crouhy, Galai, and Mark (2001) indicate the need for risk systems to control risk at individual and enterprise level.

This article begins with the identification of events that have affected the financial services industry and that indicate the need for better management of risk management knowledge. The succeeding sections introduce relevant concepts of risk management and knowledge management, present the research model that comprises eight hypotheses, and describe the analysis of the results of two regression models that were used to test them. The final sections discuss the findings and seek to interpret their meaning.

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