Australian Enterprise Risk Management Practices And Corporate Governance

This article investigates the role corporate governance plays in determining firm Enterprise Risk Management (ERM) practices. In particular, it evaluates the extent to which ERM practices adopted by Australia's top companies comply with Australian Securities Exchange (ASX) risk management recommendations based on firms' mandatory annual report disclosures. The results show the independence and separation of the role of CEO from that of board chair is important in actively monitoring corporate risk management as is the existence of a separate audit committee. Also, firms with corporate boards and audit committees which meet more frequently have higher ERM compliance than firms with less active corporate boards and audit committees. The long tenure of the CEO exerts a negative influence on ERM compliance while the percentage of female directors on corporate boards is positively associated with ERM compliance levels. In addition, firms which have improved their ERM compliance levels have better future performance compared to other firms. However, this positive relationship is found only in firms with strong governance.