Why enterprise risk management becomes embedded (or stalls) : A grounded theory of adoption and effectiveness in financial institutions

Abstract

This paper develops a grounded theory explanation of why financial institutions adopt enterprise risk management (ERM) and what makes ERM effective once implemented, using interview evidence from chief risk officers and senior risk leaders and analysing the data through constructivist grounded theory procedures and systematic coding from interview segments to categories and themes. The adoption framework indicates that ERM adoption is triggered by a combination of internal push factors and external pull forces that together create the impetus to formalise enterprise-wide risk practices. The effectiveness framework comprises four interdependent themes — shared norms, risk information capacity, risk management leadership imperative, and engagement at the top — which together explain how ERM moves beyond a formal programme to influence decisions, risk-taking behaviour, and organisational outcomes. The resulting frameworks provide a practice-oriented account of ERM as a socio-organisational system, offering boards and risk leaders a coherent set of levers and diagnostic questions to strengthen ERM adoption pathways and improve the conditions under which ERM delivers sustained effectiveness. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.