The effect of risk management on the performance of Canadian firms

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Abstract

Since the 2008 financial crisis, the relationship between investing in enterprise risk management (ERM) and its influence on business performance has continued to gain popularity and with the enormous volatility in the business world today, proper ERM is more important than ever (Chen, Tsao, Hsieh, & Hu, 2019; Maruhun, Atan, Yusuf, Rahman, & Abdullah, 2021). Is it the companies that manage risks better that perform better, regardless of the industry? The objective of this research is to analyze the effect of the way in which risks are managed by Canadian firms in different industries and the impact of this management on different levels of performance. A sample of 30 annual reports covering the fiscal years ending in 2019 and 2020 from fifteen Canadian companies that trade on the Toronto Stock Exchange (TSX) has been completed. The analysis of Pearson’s correlation coefficients as well as the coefficients of determinations made it possible to assess the relationship between the various ERM variables and company performance. By analyzing the correlations obtained for the 2019 and 2020 financial years, no significant relationship could be demonstrated between ERM, and 5 performance indicators analyzed. However, several significant correlations have indeed been demonstrated between each industry studied, these affecting different performance indicators depending on the sector.

Keywords: Enterprise Risk Management, Firm Performance, Industries, Canadian Firms

Authors’ individual contribution: Conceptualization — R.G. and E.I.; Methodology — R.G. and E.I.; Validation — R.G. and E.I.; Formal Analysis — E.I.; Investigation — R.G. and E.I.; Writing — R.G. and E.I.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: We are very grateful for the support of the Performance Research Group at the University of Québec in Outaouais.

JEL Classification: G32, G38, G28

Received: 28.05.2022
Accepted: 23.09.2022
Published online: 27.09.2022

How to cite this paper: Gouiaa, R., & Issa, E. (2022). The effect of risk management on the performance of Canadian firms. Risk Governance and Control: Financial Markets & Institutions, 12(3), 19–33. https://doi.org/10.22495/rgcv12i3p2