Enterprise risk management and company ethics: The case of a short-term insurer in South Africa

Abstract

The aim of this study was to investigate the relationship between enterprise risk management (ERM) and company ethics, so as to understand the central role of risk management in improving company ethics. A 5-point Likert scale questionnaire was used to survey all 122 employees of an insurance organization. The level of ethics was measured by posing questions on the integrity, trustworthiness, and level of respect for top management, middle management, and non-management. The overall Cronbach’s alpha for the instrument measuring the level of ethics was 0.865, indicating that the instrument was highly reliable.The relationship between ERM controls and the level of ethics was determined using regression analysis, which produced a F value of 0.268 (p-value 0.607), which implied that there is no relationship between ERM controls and the level of ethics. It was also ascertained that ethics and compliance-related issues are not fully embraced by the organization. This implied that the insurance company is at a level of “nominal” risk management with uncoordinated, top-down risk management activities.Since ethics risk exposure resulting from poor corporate governance has been identified by the Institute of Risk Management as being a key contributor to many business failures in South Africa (and internationally), the exploratory findings can stimulate the leadership to institute polices to mitigate poor governance and risk as this will benefit all stakeholders.

Keywords

• corporate governance
• financial services
• organizational culture
• organizational risk