Rethinking the implementation of enterprise risk management (ERM) as a socio-technical challenge

ERM is currently the risk management approach intended to render an organization more anticipatory and effective in evaluating, embracing, and managing the myriad risks that it may face. Accordingly, ERM has been embraced by a number of large and medium-sized organizations worldwide. However, many of those companies, while they still believe in the concept of ERM, are frustrated by implementation issues that have impeded the expected benefits of ERM.Therefore, this paper develops a theoretical framework that identifies social factors - factors peculiar to organizational structure and roles, human behavior and quality of working within the organization - and technical factors - factors peculiar to the organizational work system which includes technology, policies, rules procedures and related knowledge among other aspects - that are critical to achieving successful ERM implementation from the perspective of ERM as a complex process innovation. More specifically, this research addresses a significant question: What factors are critical to achieving successful ERM implementation? Given the significant disparity between the adoption and actual implementation and use of ERM, this is an important question. Our conceptualization of ERM implementation draws on three theoretical perspectives: the sociotechnical, the mutual adaptation and the dynamic capability perspective to frame our theoretical foundation. Yet, theories of process-based innovation suggest that an array factors combine together in influencing the extent to which complex business processes such as Enterprise risk management are successfully implemented. Our study casts light on the role of particular socio-technical factors that influence the successful implementation of ERM, extends our understanding of ERM beyond its current narrow financial view, and relates ERM implementation more closely to the challenges of management practice.