The Effect of Enterprise Risk Management (ERM) Implementation on SMEs Performance in Malaysia

Anoorat Eh Poon; Nur Hafizah Roslan; Jaizah Othman; Aimi Anuar; Maryam Yousefi Nejad

doi:10.47405/mjssh.v7i4.1460

Anoorat Eh Poon Department of Accounting & Finance, Faculty of Business Management & Professional Studies, Management and Science University (MSU), University Drive, Off Persiaran Olahraga, 40100 Shah Alam, Selangor, Malaysia.
Nur Hafizah Roslan Department of Accounting & Finance, Faculty of Business Management & Professional Studies, Management and Science University (MSU), University Drive, Off Persiaran Olahraga, 40100 Shah Alam, Selangor, Malaysia.
Jaizah Othman Department of Accounting & Finance, Faculty of Business Management & Professional Studies, Management and Science University (MSU), University Drive, Off Persiaran Olahraga, 40100 Shah Alam, Selangor, Malaysia.
Aimi Anuar Department of Business Management & Law, Faculty of Business Management & Professional Studies, Management and Science University (MSU), University Drive, Off Persiaran Olahraga, 40100 Shah Alam, Selangor, Malaysia.
Maryam Yousefi Nejad Department of Accounting & Finance, Faculty of Business Management & Professional Studies, Management and Science University (MSU), University Drive, Off Persiaran Olahraga, 40100 Shah Alam, Selangor, Malaysia.

DOI: https://doi.org/10.47405/mjssh.v7i4.1460

Keywords: Enterprise Risk Management, Small and Medium Enterprise, SMEs Performance, COSO

Abstract

This study aims to identify the effect of Enterprise Risk Management (ERM) implementation on SMEs performance in Malaysia. SME performance is used as a dependent variable, whereas eight (8) elements of ERM are based on the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework as the independent variables. Primary data were administered through questionnaires among 312 respondents from the main contributing sectors of SMEs; agriculture, construction, mining and quarrying, services and manufacturing across all states in Malaysia. This study employed six (6) analyses, including descriptive statistics, normality, reliability, correlation, multiple regression analysis and hypothesis testing. Results from correlation analysis indicated that the independent variables represented eight (8) elements of ERM, illustrating a positive, strong correlation with the dependent variable. Multiple regression analysis showed that ERM has a positive effect on SME performance. However, only three (3) of the ERM elements, namely event identification, risk assessment, and risk response, significantly affect SME performance. The information was gathered from a questionnaire of 312 respondents and there are only 177 respondents think that their company implemented ERM, whereas the remaining 135 do not think their company implements ERM. An ERM implementation in SMEs is expected to be able to find solutions to minimise the risks that SMEs may or may not face. Effective risk management can enable SME owners, managers and employees to achieve business objectives. As a result, risk management enhances the value of the business, increases profitability, and improves the overall performance of SMEs.

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