Risk management practices adopted by financial firms in Malta
Abstract
Purpose
The purpose of this paper is to bring to light the risk management practices adopted by financial firms in the small island state of Malta. It seeks to: first, identify the risk management strategies and mechanisms that these firms adopt to manage risks, maximise opportunities, and maintain financial stability; second, determine whether these practices are perceived as contributing to principled performance; third, examine the extent to which risk management capabilities offer competitive advantage to firms, and fourth, investigate whether corporate social responsibility (CSR) is a key driver of risk management corporate strategies.
Design/methodology/approach
A self-administered questionnaire purposely designed for the present study was distributed among the 156 credit institutions, investment firms and financial institutions registered with the Malta Financial Services Authority. Overall, 141 firms participated in the study (a response rate of 90.4 per cent) and the responses were subjected to statistical analysis in an attempt to answer four research questions.
Findings
Maltese financial firms have sound risk management practices that link positively with added value and principled performance. Although competitive advantage has been given less weight by these firms, the implemented risk management mechanisms allow for a strong risk culture, defined risk management goals, accountability and continual improvement. CSR forms part of the firms’ risk management corporate strategies and is valued as part of these firms’ corporate culture, while financial/economic factors are viewed as key in driving effective risk management principles.
Originality/value
The study provides empirical evidence that securing “best practice” in firms’ risk management corporate culture is seen as better predicated on maximising financial advantage (“the instrumental driver”) rather than simply reflecting externally imposed standards (“the compliance driver”).
Keywords
Acknowledgements
All the three authors have contributed equally to this paper. The authors would like to thank all those who participated in our survey. The authors are also grateful towards the blind reviewers and the editor for their constructive feedback and insightful comments. Last but not least, the authors would like to thank Professor Lino Briguglio and Dr John Consiglio from the University of Malta for providing us with insightful discussions about the research.
Citation
Bezzina, F., Grima, S. and Mamo, J. (2014), "Risk management practices adopted by financial firms in Malta", Managerial Finance, Vol. 40 No. 6, pp. 587-612. https://doi.org/10.1108/MF-08-2013-0209
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited