Implementing Enterprise Risk Management in Swedish Corporations: A Study of Incentives and Obstacles

Abstract: In Sweden, a number of companies have started viewing risk management from a holistic perspective rather than a silo-based one. This holistic approach is referred to as Enterprise Risk Management (ERM). Research on ERM has mainly focused on the implementation process and whether it can be value adding for shareholders. This study is designed to look at why companies decide to implement ERM and what obstacles are faced in the implementation process. Based on interviews with CROs of 12 Swedish non-financial firms that explicitly claim to have ERM, we conclude that regulations on corporate governance and improved investment decision making are the two main drivers of ERM-implementation. We are also able to identify a set of obstacles including a conflict in who the risk owner is, difficulties to aggregate qualitative and quantitative risks, inhibited creativity due to ERM and that the character of the implementation is dependent on the CRO’s background. Further, we suggest that the implementation can be done more efficient if preceded by a planning and communication phase, and that the implementation process itself can be value adding by improving internal cooperation and reducing internal problems.