AN EXAMINATION OF VALUE ENHANCING ENTERPRISE RISK MANAGEMENT IMPLEMENTATION FRAMEWORK FOR MALAYSIAN PUBLIC LISTED COMPANIES

Enterprise risk management or ERM is fast ascending the corporate agenda globally. Its relevancy and popularity as a management technique are abetted by the changing business practices and burgeoning regulatory requirements on risk management. ERM is defined as the process of identifying and analyzing risk from an integrated, company-wide perspective in a structured and disciplined approach in aligmng strategy, processes, people, technology and knowledge with a purpose of evaluating and managing the uncertainties facing the enterprise as it creates value. ERM essentially lays concern for managing the firm's specific risk apart from the systematic risks. However, the neo-classical finance theory (NCFT) postulates that managing firm-specific risk is irrelevant. Nonetheless, this notion is in stark contrast to the phenomenon of increased acceptance of ERM by industry practitioners. As such, this thesis attempts to propose an ERM implementation framework to theorize a model that captures the causal relationships of the risks that are strategically associated with the firms' business performance and the cost of capital, e.g. risk premium. This thesis highlights the notion of managing firms' unsystematic (specific) risk via an ERM implementation framework that leads to the enhancement of shareholders' value. The mechanism through which the firms' value enhancement takes place is theorized by a strategic conceptualization of risk premium model. The model cites managing the firm's three classes of unsystematic risk, namely tactical risk, strategic risk, and normative risk. The specific aims of this thesis are fourfold: (i) to examine the depth of penetration of ERM practices among the public listed companies in Malaysia; (ii) to examine how an effective impiementation process of ERM will bring about value-enhancing outcome to Malaysia public listed companies (PLCs); (iii) to analyze the value proposition hypotheses of corporate risk management as the determinants for ERM practices; and (iv) to investigate the validity of the theorized value creation transmission mechanism of the proposed ERM framework via the strategic conceptualization of risk premium model. The data is collected through questionnaires survey from 128 PLCs on the Malaysian stock exchange. Variables in the questionnaire are measured in 5-point Likert's scale. The analyses encompass factor analysis and structural equation modeling (SEM). Outcomes of the factor analysis provide inputs (the measurement model) for the SEM analysis. The SEM validates the theorized causal relationships among the three constructs, i.e. ERM implementation challenge, ERM implementation intensity, andperceivedERM benefitmeasures: The modified model incorporates a second-order factor model which presents improved overall goodness-of-fit values than the proposed model. Apart from that, the analytic also comprises bivariate correlation analysis of hypotheses testing in relation to the various aspects of: (i) the value maximization theory of ERM practices; and (ii) the value creation transmission mechanism of the proposed ERM implementation framework. The analysis results conclude the following: (i) that all causal relationships (structural model) under SEM examination indicate significant parameters; (ii) that ERM implementation has significant positive associations with value maximization theories of risk management; (iii) that ERM implementation has significant positive effects in reducing the firm's tactical and strategic risks with the consequence of lowering the firm's risk premium

Efficacy of Enterprise Risk Management in Enhancing Sustainability and Financial Performance in the Solar PV Industry: A Conceptual Framework

As an alternative to fossil fuels, solar PV electricity can help mitigate global warming and improve the environment by lowering greenhouse gas emissions (GHG). More nations have developed programs to encourage the production and use of PV electricity, considering the potential of renewable energy for sustainable development. The government of Malaysia wants solar PV to be the primary source of renewable energy by 2030. To reduce global warming, renewable energy technology must be implemented more widely. However, the production of solar photovoltaic modules raises serious sustainability concerns. These concerns include using conflict minerals, toxicity, and limited supply or supply chain governance risks of rare materials. Even though solar energy projects are technically feasible, stakeholders still view the region’s initiatives as risky due to ongoing governance problems. Domains related to solar project deployment that involve installation, operation, and management are particularly susceptible to governance issues, such as a lack of accountability and transparency. Renewable energy investments upfront are risky and expensive. Risks in the solar PV value chain include subpar design and manufacturing decisions, inventory losses, quality problems during the execution process, and cultural and societal problems brought on by the absence of an effective risk management system. This study thus investigates how the implementation of ERM influences the company’s financial performance. Enterprise Risk Management (ERM) is a technique that regulates, and coordinates offset risks all over the firm to manage and integrate all risks holistically. As a result, this paper provides a conceptual and theoretical framework for how corporations use risk management to lower the cost of capital and improve sustainable development in the solar PV industry. The suggested theoretical and conceptual framework, supported by stakeholder and legitimacy theory, provides a foundation for empirically validating the entangled interaction between the relevant variables. It is advocated that measuring variables such as enterprise risk management, financial performance, and sustainability performance be based on previous research and frameworks and recommendations produced by major organizations. The purpose of this paper is to guide Malaysian solar PV companies in the implementation of sustainability and risk management. Keywords: enterprise risk management, sustainability, solar PV, financial performanc

The Relationship Between Enterprise Risk Management and Cost of Capital

This paper investigates the effect of enterprise risk management (ERM) implementation on the cost of capital (cost of debt, cost of equity, and weighted average cost of capital) for the oil and gas industry. The research is conducted using panel data analysis from 2008-2017 for 41 oil and gas companies publicly listed on the Bursa Malaysia. ERM implementation data is collected from company annual reports, while the cost of capital data is obtained from Thomson Reuters DataStream. The results indicate that an increase in the level of ERM implementation reduces the cost of capital, which we argue is one mechanism through which ERM increases firm value. Future research can use our investigation to delve deeper into ERM and value creation topics

Solar Photovoltaic Technology and its Impact on Environmental, Social and Governance (ESG) Performance: A Review

To mitigate greenhouse gas (GHG) emissions in the environment, renewable energy sources hold significant potential to offer clean and green energy, and reduce carbon emissions. Utilizing solar power systems can ensure the generation of clean and sustainable energy, leading to reduced GHG emissions during the electricity production process. The adoption of solar energy systems has witnessed a remarkable surge in recent years due to the evident surge in demand for environmentally friendly power sources. There are multiple avenues for prospective research and development in the realm of solar power systems. Gaining familiarity with the requisite technology and its suitability for the diverse demands and consumption patterns is of paramount importance. In this context, the focus of this study centers around solar photovoltaic (PV) technologies. Solar PV technology is positioned to significantly contribute to global energy requirements, offering multi-terawatt capacity for clean and green energy. Notably, due to its well-established infrastructure and economic feasibility, solar PV technology emerges as an optimal choice for both small and large-scale projects. This study places a special emphasis on sustainability as a lens through which recent advancements in solar PV technology are examined. In a world where concerns about climate change mitigation and sustainability are mounting, solar PV technology stands out as a foremost source of clean and environmentally friendly energy, serving as a pragmatic solution for fostering sustainable development. Keywords: solar PV technology, ESG risks, sustainability approaches, solar power systems, sustainable energ

A Proposed Framework for Assessing BNPL (Buy Now, Pay Later) Adoption and its Impact on Consumers' Buying Behavior

Buy Now, Pay Later (BNPL) services allow retailers and enterprises to offer their consumers installment-based payment plans to help them manage their personal finances. As such, this research aims to examine the impact of BNPL services on consumer buying behavior. BNPL services are segmented into a convenient payment system, flexible repayment system, and accessible credit system. The study proposed primary data to be collected from Malaysian youth aged between 18 to 40 years through questionnaire. Partial Least Square-Structural Equation Modeling (PLS-SEM) is proposed to analyze the data. The conceptualized framework is underpinned based on the Diffusion of Innovation (DOI) theory that suggests that the adoption of BNPL services has a significant and positive impact on consumer buying behavior. This study will provide insights for regulators and industry players to decide BNPL’s future and to enhance its availability and adoption among the consumers. Keywords: BNPL services, convenient payment system, flexible repayment system, and accessible credit system, diffusion of innovation theor

Energy Consumption and Economic Growth Nexus in the SAARC Region

In recent years, demand for energy consumption has increased, especially in emerging countries such as the South Asian Association for Regional Cooperation (SAARC) member countries. This study thus aims to investigate the explicit relationship between energy consumption and economic growth in the SAARC countries. The researchers employed panel econometric techniques using data for the period 2002-2020. The study used pooled OLS, fixed effect and GLS estimators for estimation purposes. The pivotal results of the work revealed that the nexus of energy consumption with per capita income is not only significant but also takes an inverted u-shaped. As research evidence in the SAARC region is limited, we expect policymakers working in the energy sector to benefit significantly from the results of this study. This work contributes to the limited empirical studies exploring the impact of energy consumption on economic growth specifically in the SAARC region, with interesting findings that provide important insights to the SAARC region on electricity consumption and per capita income. Keywords: energy consumption, economic growth, SAARC countries, panel data

Critical Review of Literature on Enterprise Risk Management and the Cost of Capital: The Value Creation Perspective

Enterprise risk management (ERM) encompasses the spectrum of identifying and analyzing risk from an integrated, company-wide perspective in a structured and disciplined approach in aligning strategy, processes, people, technology and knowledge with a purpose of evaluating and managing the uncertainties facing the enterprise as it creates value. ERM essentially lays concern for managing the firm’s idiosyncratic risks apart from the systematic risks. However, the neo-classical finance theory (NCFT) postulates that managing the firm’s idiosyncratic risks is irrelevant. ERM implementation framework embraces the active management of the firm’s three classes of unsystematic risk, namely tactical risk, strategic risk and normative risk. This paper aims to provide a critical review of literature on the notion of managing firms’ unsystematic (specific) risk via an ERM implementation framework that leads to the enhancement of shareholders’ value. The mechanism through which the firms’ value enhancement is supposed to take place is theorized by a strategic conceptualization of risk premium model

An examination of value enhancing enterprise risk management implementation framework for Malaysian public listed companies / Lai Fong Woon

Enterprise risk management or ERM is fast ascending the corporate agenda globally. Its relevancy and popularity as a management technique are abetted by the changing business practices and burgeoning regulatory requirements on risk management. ERM is defined as the process of identifying and analyzing risk from an integrated, company-wide perspective in a structured and disciplined approach in aligning strategy, processes, people, technology and knowledge with a purpose of evaluating and managing the uncertainties facing the enterprise as it creates value. ERM essentially lays concern for managing the firm‟s specific risk apart from the systematic risks. However, the neo-classical finance theory (NCFT) postulates that managing firm-specific risk is irrelevant. Nonetheless, this notion is in stark contrast to the phenomenon of increased acceptance of ERM by industry practitioners. As such, this thesis attempts to propose an ERM implementation framework to theorize a model that captures the causal relationships of the risks that are strategically associated with the firms‟ business performance and the cost of capital, e.g. risk premium. This thesis highlights the notion of managing firms‟ unsystematic (specific) risk via an ERM implementation framework that leads to the enhancement of shareholders‟ value. The mechanism through which the firms‟ value enhancement takes place is theorized by a strategic conceptualization of risk premium model. The model cites managing the firm‟s three classes of unsystematic risk, namely tactical risk, strategic risk, and normative risk. The specific aims of this thesis are fourfold: (i) to examine the depth of penetration of ERM practices among the public listed companies in Malaysia; (ii) to examine how an effective implementation process of ERM will bring about value-enhancing outcome to Malaysia public listed companies (PLCs); (iii) to analyze the value proposition hypotheses of corporate risk management as the determinants for ERM practices; and (iv) to investigate the validity of the theorized value creation transmission mechanism of the proposed ERM framework via the strategic conceptualization of risk premium model. The data is collected through questionnaires survey from 128 PLCs on the Malaysian stock exchange. Variables in the questionnaire are measured in 5-point Likert‟s scale. The analyses encompass factor analysis and structural equation modeling (SEM). Outcomes of the factor analysis provide inputs (the measurement model) for the SEM analysis. The SEM validates the theorized causal relationships among the three constructs, i.e. ERM implementation challenge, ERM implementation intensity, and perceived ERM benefit measures. The modified model incorporates a second-order factor model which presents improved overall goodness-of-fit values than the proposed model. Apart from that, the analytic also comprises bivariate correlation analysis of hypotheses testing in relation to the various aspects of: (i) the value maximization theory of ERM practices; and (ii) the value creation transmission mechanism of the proposed ERM implementation framework. The analysis results conclude the following: (i) that all causal relationships (structural model) under SEM examination indicate significant parameters; (ii) that ERM implementation has significant positive associations with value maximization theories of risk management; (iii) that ERM implementation has significant positive v effects in reducing the firm‟s tactical and strategic risks with the consequence of lowering the firm‟s risk premium

Fiscal Deficit and Its Less Inflationary Sources of Borrowing with the Moderating Role of Political Instability: Evidence from Malaysia

Theoretically, fiscal deficit may be inflationary, but its sources of financing can bring change in significance and impact. Malaysia is facing a high tendency of fiscal deficit from the last decade. To finance the fiscal deficit, which sources are less inflationary in the country? To answer this question, the study aims to analyze the quarterly financial time-series data covering the period from 2000 Q1 to 2018 Q4 of Malaysia using recent econometric techniques. The analysis is carried out in three stages. In the first stage, it is tested that the fiscal deficit is inflationary along with the money supply. In the second stage, it is determined that political instability moderates the link between inflation and the fiscal deficit and the external sources of borrowing in the short-run, while the domestic sources of borrowing in the long run are found inflationary. In the third stage, the central bank borrowing and Bank institutions borrowing from the domestic sources and the short-term borrowing from the external sources are found less inflationary. The findings suggest that borrowing through the central bank and bank institutions (domestic sources) is less inflationary in the long term; while for a short-term policy, from external sources, only short-term borrowing is less inflationary; medium- and long-term borrowing are much more sensitive to inflation