Implementation of Enterprise Risk Management Practices in Organizations: An Empirical Analysis of Takaful Industry Financial Performance

Abstract

the E&Y global report on Takaful industry, it has been observed consecutively that an ineffective Enterprise Risk Management (ERM) is among the top five business risks of the Takaful Industry. The present study has been conducted with an aim to find the impact of Enterprise Risk Management (ERM) Implementation on the Financial Performance of the world Takaful Industry. In this regard, ERM implementation level has been measured through the availability of Chief Risk Officer (CRO), Establishment of a Risk Management Committee in the firm, the Board Independence level within firm, the hiring of an auditor from big four auditors firm, firm size, percentage of institutional ownership in the shareholding structure, the operational diversification of a firm (national or international) and the percentage change in the revenues of the firm. There are two control variables in the study that are age and Gross Domestic Product (GDP). On the other side the financial performance is measured in terms of accounting performance and market performance. For this purpose two financial performance indicators Return on Assets (ROA), Return on Equity (ROE) have been used. A sample of 30 Takaful Firms from 10 countries has been taken for a period of 4 years (2012-2015). The study is quantitative in nature and secondary data has been used for this purpose. Hypotheses are being tested one by one through correlation and regression analysis by using Stata and Eviews. The results of the study indicate that majority of the hypothesis are accepted and shows a positive impact of ERM Implementation on the Financial Performance of the Takaful Industry.