Marketing

Philosophy

Statistics

Economics

Computer science

Structural equation modeling

Empirical evidence

Business

Organizational performance

Mathematics

Management

Enterprise risk management

Epistemology

Organizational culture

Risk management

Strategic financial management

Industrial organization

Finance

Strategic planning

Machine learning

Risk Management

This paper responds to the lack of empirical evidence on how enterprise risk management (ERM) and the financial performance of small and medium-sized enterprises (SMEs) are related. Structural equation modeling is used to explore new mediators in the relationship between ERM and SME financial performance. The results show that organizational culture (mission dimension) and strategic risk management performance are full and positive mediators between ERM and financial performance. These research results highlight the fact that the implementation of ERM in an enterprise does not by itself generate the expected effects without the existence of a mature organizational culture and the monitoring of strategic risk management performance. These findings are particularly relevant for SMEs with “pretend ERM” that lacks the strategic and operational components. ERM also helps to transform the negative effect of foreign capital in SME equity on financial performance into a positive effect.

Exploring the indirect links between enterprise risk management and the financial performance of SMEs