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ERM adoption in the insurance sector: Is it a regulatory imperative or business value driven?

Mirna Jabbour (Management School, University of Sheffield, Sheffield, UK)
Magdy Abdel-Kader (Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, UK)

Qualitative Research in Accounting & Management

ISSN: 1176-6093

Article publication date: 10 October 2016

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Abstract

Purpose

This paper aims to investigate various institutional pressures driving the adoption and implementation of a new risk management system; enterprise risk management (ERM).

Design/methodology/approach

The implementation of ERM-related practices is analysed based on an institutional framework and drawing on empirical evidence from multiple sources in ten large/medium-sized insurance companies. This paper focuses on extra-organisational pressures exerted by political, social and economic institutions on insurance companies which drove the adoption decision.

Findings

It was found that different change agents have taken part in the decision to introduce new risk management system as a part of ERM implementation process. Further, the institutional pressures, coercive, mimetic and normative, were found to differ in character and strength over different intervals of time in relation to the adoption of ERM. Companies that adopted ERM early were mostly driven by internal strategic drivers, whereas the recent adoption decision was more driven by coercive and mimetic pressures. Thus, evidence of divergence between insurance companies was found.

Research limitations/implications

The findings have implications for policy makers, regulatory agencies and innovation developers. ERM was considered not only as a necessity but also as a value added to the insurance companies under study. Thus, regulators and innovation developers should survey main players in any specific organisational field to understand their views before issuing new compulsory regulations or developing innovations. They also need to consider exploring companies’ experiences with ERM, which can provide a basis for the development of strengthened and more informative regulatory ERM frameworks. This will support a faster and easier understanding and implementation of ERM framework hindered by the confusions companies may face when considering the complicated/changing regulatory and risk requirements.

Originality/value

This study extends the scope of institutional analysis to the risk management field, particularly ERM and to the explanation of how different institutions affect the decision to move towards ERM and modify the risk management rules applied within the organisational environment. It looks not only at convergences but also divergences associated with the period of time when ERM adoption decision was made. Thus, it develops a processual view of change.

Keywords

Acknowledgements

The authors gratefully acknowledge the comments and suggestions of two anonymous reviewers and Professor John Burns (the editor).

Citation

Jabbour, M. and Abdel-Kader, M. (2016), "ERM adoption in the insurance sector: Is it a regulatory imperative or business value driven?", Qualitative Research in Accounting & Management, Vol. 13 No. 4, pp. 472-510. https://doi.org/10.1108/QRAM-03-2015-0035

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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