A Research Of Enterprise Risk Management And Value Creation

Risk is inherent to all functions of business. For the time being, implementing enterprise risk management (ERM) has become a consensus especially after the2008financial crisis. Increasing number of organizations have implemented or are considering ERM programs. Despite the heightened interest in ERM by academics and practitioners, there is an absence of empirical evidence regarding the impact of ERM on firm value. The main objective of this research is to examine whether ERM creates value and to what extent it increases firm value in practice. Through theoretical and empirical analysis, it is concluded that there is a positive relation between firm value and the implementing of ERM. The ERM premium is approximately1.46%and it is economically and statistically significant.The study is structured as follows. First, the research makes a review of relative studies conducted by scholars both domestic and abroad as well as the practice of ERM. Then the article provides a brief summary of the evolution of risk and risk management. Thereafter, the theory and framework of enterprise risk management are elaborated in detail. Third, the study explains the ways that ERM adds firm value theoretically and examine the effects of ERM implementing empirically. Fourth, the author introduces the current condition of ERM implementing in China’s insurance industry and makes a number of proposals to enhance the implementing of ERM.Although many surveys and analysis have stated the benefits of adopting ERM, there has been little empirical evidence on how ERM affects firm value. The main innovation of this research is that it empirically examines the effects of ERM on firm value.