The Impact of Core Risk Management Principles on the Enterprise Risk Management Processes of Banks: The Evidence of Joint-Stock Commercial Banks in Ho Chi Minh City, Viet Nam

Abstract

Enterprise Risk Management (ERM) is an organisation's holistic risk management (RIM) approach. ERM has quickly become the best practice of high-risk institutions like banks. This study aimed to examine the interrelationship of critical principles and components of the ERM framework, namely organisational culture (ORC), risk governance structure (RGS), organisational dynamic capabilities (DYC) and ERM processes. Data were collected using a survey questionnaire. The respondents are managers and experienced officers in the RIM in joint-stock commercial banks (JSCB) in Hochiminh City (HCMC). PLSSEM is employed with SmartPLS software. The research results show that ORC, RGS, and DYC have a direct and indirect impact on ERM processes. Furthermore, ORC, RGS, and DYC play a mediating role in the relationship between ORC and ERM, between ORC and ERM, and between RGS and ERM, respectively. To manage risk in creating, preserving, and realising value, a business needs to integrate the principles, framework, and processes of RIM. This research makes a valuable contribution to the existing literature by empirically investigating the impact of the RGS, ORC, and DYC on ERM processes. It suggests practical implications for JSCB in HCMC. Limitations of the study are that other crucial factors of the external environment influencing the implementation of ERM by banks have yet to be considered.