Implementation of Enterprise Risk Management in Medium-Sized Priority Sector Companies in East Java


  • Pwee Leng Management Department, University of Airlangga, Surabaya
  • Basuki Basuki Accounting Department, University of Airlangga, Surabaya
  • Rahmat Setiawan Management Department, University of Airlangga, Surabaya



Enterprise Risk Management, implementation of ERM, ERM maturity level, ERM maturity measurement model, medium-sized industrial enterprises, priority sector


Enterprise Risk Management (ERM) has the benefit of enhancing organizational effectiveness, risk reporting, and improving business performance. The maturity measurement of ERM implementation is crucial in deducing risk management conditions and disparities within the company as means to achieve a more targeted ERM pursuance, one which is beneficial in assessing the company's condition. This study used sixteen criteria of ERM Maturity Models, to measure the maturity level of ERM implementation carried out by medium-sized industrial companies in priority sectors in East Java. Data were obtained from 137 company directors or managers of Medium Industry companies dispersed across 38 districts/cities in East Java among 6 priority sectors. Results showed that 43.5% and 46.6% of companies that experienced sales growth and an increase in net profit, respectively, are companies with optimal implementation of ERM. Meanwhile, 67% of companies that underwent a decline in sales performance and net profit turned out to be companies with weaker ERM implementation levels.


Abd Razak, Noraznira, Zuriah Ab Rahman, and Halimahton Borhan. 2016. Modeling firm resources–Enterprise risk management relationships: An empirical finding using PLS-SEM. World Journal of Entrepreneurship, Management and Sustainable Development, 12: 35–49

Aguirre, Mercedes & Vadiveloo, Jay. (2013). Enterprise Risk Management – Small & Medium Sized Enterprises.

Agustina, L., & Baroroh, N. (2016). The Relationship Between Enterprise Risk Management (ERM) And Firm Value Mediated Through The Financial Performance. Review of Integrative Business and Economics Research, Vol. 5, no. 1, 128-138.

Ahmed, I. and N.A. Manab, 2016. Influence of enterprise risk management framework implementation and board equity ownership on firm performance in Nigerian financial sector: An initial finding. IOSR Journal of Business and Management, 18(1): 61-68.

Altman, E. I., Sabato, G., & Wilson, N. (2010). The Value of Non‐Financial Information in Small and Medium‐Sized Enterprise Risk Management. The Journal of Credit Risk, 6(2), 1‐33

Amalina N, Abdullah M, Zakuan N, Khayon M, and Ariff M.S. 2012. Adoption of Enterprise Risk Management Practices in Organization: A Review. International Journal Business & Information Technology, 2(1), 1-9. Retrieved/from

Aribawa, D. (2016). Pengaruh literasi keuangan terhadap kinerja dan keberlangsungan UMKM di Jawa Tengah. Jurnal Siasat Bisnis, 20(1), 1–13.

Ahmad Suhaimi, M. A. (2020). Analisis Manajemen Resiko UMKM Batik Bangkalan Madura di Tengah Pandemi Covid-19. Jurnal Manajemen Risiko, 1(II), 141–148

Annamalah, Sanmugam, Murali Raman, Govindan Marthandan, and Arvin dan Kalisri Logeswaran. 2018. Implementation of Enterprise Risk Management (ERM) Framework in Enhancing Business Performances in Oil and Gas Sector. Economies. 6: 4

Badan Pusat Statistik. (2019). https://www.

Badan Pusat Statistik. (2020b). https://www.

Badan Pusat Statistik PDB indonesia 2017—2021. (2021).

Bahri, Moujib, Josée St-Pierre, Ouafa Sakka, (2017) "Performance measurement and management for manufacturing SMEs:a financial statement-based system", Measuring Business Excellence, Vol. 21 Issue: 1, pp. 17-36,

Ballantyne, R. (2013). An Empirical Investigation into the Association between Enterprise Risk Management and Firm Financial Performance. Doctoral dissertation, Lawrence Technological University.

Barton, T., Shenkir, W., Walker, P., 2002. Making Enterprise Risk Management Pay off.

Baxter, R., Bedard, J. C., Hoitash, R., Yezegel, A. 2012. ‘Enterprise risk management program quality: determinants, value relevance, and the financial crisis’, Contemporary Accounting Research, Forthcoming.

Bogodistov, Yevgen, and VeitWohlgemuth. 2017. Enterprise risk management: a capability-based perspective. The Journal of Risk Finance 18: 234–51.

Brigham, E. and Houston, J. (2007). Fundamentals of Financial Management. Thomson outhwestern, Cincinnati

Callahan, Carolyan, and Jared Soileau. 2017. Does Enterprise risk management enhance operating performance? Advances in Accounting 37: 122–39.

Chairani, C., & Siregar, S. V. (2021). The effect of enterprise risk management on financial performance and firm value: the role of envi¬ron-mental, social and governance performance. Meditari Accountancy Research, Vol. 29 No. 3, 647-670.

Ciorciari, M. & Blattner, P. (2008). Enterprise risk management maturity-level assessment tool. The Society of Actuaries.

Combs, James G, T. Russell Crook, and Christopher L. Shook. 2005. The Dimensionality of Organizational Performance and Its Implications for Strategic Management Research. Research Methodology in Strategy and Management, Vol. 2, 259–286

COSO. (2004). Enterprise Risk Management—Integrated Framework. 16.

COSO. (2017a). Enterprise Risk Manage-ment—Integrating with Strategy and Performance (2017).

COSO. (2017b). Welcome to COSO.

Faisal, F., Abidin, Z., Haryanto, H., & Seet¬haram, Y. (2021). Enterprise risk management (ERM) and firm value: The mediating role of investment decisions. Cogent Economics & Finance, Vol. 9 - issue 1, 1-15.

Duckert, G. (2011). Practical enterprise risk management: a business process approach. Wiley: Hoboken

Florio, & Leoni. (2017). Enterprise risk management and firm performance: The Italian case.

Falkner, E. M., & Hiebl, M. R. (2015). Risk management in SMEs: a systematic review of available evidence. The Journal of Risk Finance, 16(2), 122‐144.

Gates, N. W. (2012). Enterprise Risk Mana-gement: A process for Enhanced Management and Improved Performance. Management Accounting Quarterly, 28-38.

Gordon, L. A., Loeb, M. P., & Tseng, C.-Y. (2009). Enterprise risk management and firm performance: A contingency perspective. Journal of Accounting and Public Policy, 28(4), 301–327.

Hopkin. (2010). Fundamentals of Risk Mana-gement (5th ed.).

Hoyt, & Liedenberg. (2011). The Value of Enterprise Risk Management—Hoyt—2011—Journal of Risk and Insurance—Wiley Online Library.

Hoyt, R. E., & Liebenberg, A. P. (2011). The Value of Enterprise Risk Management. The Journal of Risk and Insurance, 78(4), 795–822.

Iswajuni, I., Manasikana, A., & Soetedjo, S. (2018). The effect of enterprise risk management (ERM) on firm value in manufacturing companies listed on Indonesian Stock Exchange year 2010-2013. Asian Journal of Accounting Research, Vol. 3 No. 2, 224-235.

Kadisperindag. (2021). Kadisperindag: PDRB Jatim 30,6 Persen Ditopang Sektor Industri | Dinas Komunikasi dan Informatika Provinsi Jawa Timur.

Kemenperin: Kebijakan Industri Nasional. (2020). 19/Kebijakan-Industri-Nasional

Kemenperin. (2021). Kemenperin: Pemerintah Optimalkan Peran Industri Pulihkan Ekonomi Nasional.

Kim, Young Jun, and Nicholas S. Vonortas. (2014) Managing Risk in the Formative Years: Evidence from Young Enterprises in Europe. Technovation, 34.8: 454‐465

Kontribusi PDRB nasional 2020. (2021).

Lai, F.W., F. A. Samad, “Enterprise Risk Management Framework and The Empirical Determinants of Its Implementation,” Risk, Vol.6, p. 8, 2010

Lam, J. (2014). Enterprise Risk Management: From Incentives to Controls—James Lam—Google Book. about/Enterprise_Risk_Management.html?id=9E50AgAAQBAJ&redir_esc=y

Lewin, A., &Minton, J. (1986). Determining organizational effectiveness: Another look, and an agenda for research. Management Science, 32(5), 514–538.

Liebenberg, A. P., & Hoyt, R. E. (2003). The Determinants of Enterprise Risk Management: Evidence From the Appointment of Chief Risk Officers. Risk Management and Insurance Review, 6(1), 37–52.

Liu X. 2012. Model for evaluating the risk management of trade enterprise with Interval intuitionistic trapezoidal fuzzy information. Advances in Information Sciences and Service Sciences, 4(4): 11-17

Loosemore M., Raftery J., Reilly C., Higgon D. (2006) Risk management in projects. London: Taylor & Francis

Maltz, A., Shenhar, A., & Reilly, R. (2003). Beyond the balanced scorecard: Refining the search for organizational success measures. Long Range Planning, 36, 187–204.

McShane, M. K., Nair, A., & Rustambekov, E. (2011). Does Enterprise Risk Management Increase Firm Value? Journal of Accounting, Auditing & Finance, 641-658.

Meulbroek L. The promise and challenge of integrated risk management. Risk Management and Insurance Review, vol. 5, pp. 55-66, 2002

Misbah, M. (2017). Asesmen Maturitas Manajemen Risiko Perusahaan Pada Kontraktor Kecil Dan Menengah. Jurnal Teknik Mesin, 6, 87.

Muslih, M. (2019). The Benefit of Enterprise Risk Management (ERM) On Firm Performance. Indonesian Management and Accounting Research, 17, 171.

Nocco, B. W., & Stulz, R. M. (2006). Enterprise Risk Management: Theory and Practice.

Pagach D.P and Warr R.S. 2010. The effects of enterprise risk management on firm performance. available at SSRN 1155218

Pedrycz W, Gomide F (1998). An indroduction to fuzzy sets: Analysis and design. MIT Press, Cambridge

Radner, R, and L Shepp. 1996. Risk vs. profit potential: A model for corporate strategy. Journal of Economic Dynamics Control 20: 1373–93.

Ramlee, R., & Ahmad, N. (2015). Panel Data Analysis on the Effect of Establishing the Enterprise Risk Management on Firms’ Performances. Proceedings of 4th European Business Research Conference Imperial College (pp. 1-10). London, UK: Imperial College, London, UK.

Risk Management. RIMS Risk Maturity Model: Performance Management. (2014). Retrieved from https://www.riskmanagement¬

Rowe, W., & Morrow, J. (1999). A note on the dimensionality of firm financial performance using accounting, market, and subjective measures. Canadian Journal of Administrative Sciences, 16(10), 58–70

Santori, L., Bevan, K., and Myers, C. (2007). Summary of Standard & Poor's Enterprise Risk Management Evaluation Process For Insurers. New York, NY: Standard & Poor's

Shook, C. L., Ketchen, D. J., Cycyota, C. S., & Crockett, D. (2003). Data analytic trends and training in strategic management research. Strategic Management Journal, 24, 1231–1237.

Smith, J.A. (1998). Strategies for startups. Long Range Planning, 31(6): 857-872 Society of Actuaries Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2004. Enterprise Risk Management Framework. New York: American Institute of Certified Public Accountants.

Tahir, IM and Razali, AR 2011, The Relationship Between Enterprise Risk Management (ERM) and Firm Value: Evidence From Malaysian Public Listed Companies. Management, Vol.1, No.2, pp.32-41

Waweru, N., & Kisaka, E. (2013). The Effect of Enterprise Risk Management Implementation on the Value of Companies Listed on the Nairobi Stock Exchange. Journal of Applied Finance & Banking, 3(3).

Woo, C., & Willard, G. (1983). Performance representation in business policy research: Discussion and recommendation. Paper presented at Academy of Management meetings, Dallas, TX.

Wu, Q. L. Y. and U. Ojiako. 2014. Enterprise risk management and firm value within China’s insurance industry.