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Article
Publication date: 31 August 2010

Elena Demidenko and Patrick McNutt

The purpose of this paper is twofold: first to add to the debate on good governance and ethics of enterprise risk management (ERM) and second to describe an ethical maturity scale…

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Abstract

Purpose

The purpose of this paper is twofold: first to add to the debate on good governance and ethics of enterprise risk management (ERM) and second to describe an ethical maturity scale based on duty and responsibility for practical implementation to ensure better governance.

Design/methodology/approach

The methodology has centred on risk governance as a way for many organisations to improve their risk management (RM) practices from an ethical perspective based on responsibility and on fulfilling one's duty within the organisation.

Findings

While companies in Australia, for example, are more mature than those in Russia in terms of governance systems life cycle, there are a number of common international challenges in risk governance implementation. These relate to a link between risk framework, enterprise value model and strategic planning; to a definition of risk appetite, the embodiment of RM in organisational culture, internal audit and ERM function, the evolving role of a chief risk officer (CRO) and senior management buy‐in and sponsorship of the integrated ethical RM from a chief executive officer.

Practical implications

ERM – a way for many organisations to improve their RM practices – is a key component of the applied ethics of corporate governance. It has developed into a philosophy to assist organisations with the process of protecting shareholders' value while also increasing the bottom‐line profitability. Effective ERM is based on ethical risk governance. Internal audit needs to be involved in the process of integrating RM and compliance. It should maintain a degree of independence when assisting with ERM establishment. CRO is most effective when reporting to the board.

Originality/value

Global companies are becoming more accountable to multiple stakeholders. It is the adoption of an ethical code to arrest the lack of clarity of roles ascribed to the audit committee and risk committee and management's accountability or lack thereof that remains the challenge across different jurisdictions. In attempting to implement good governance and meet the challenges, the paper introduces an ethical maturity scale as an internal measure that could be embedded in an organisation's strategy.

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

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