Risk Management in Private Companies and Public Sector Organizations: A Preliminary Comparative Study
Keywords: Risk management, Public and private organizations, Governance, Organizational process
Abstract
Purpose – The effectiveness of risk management in an organization depends largely on its organizational culture as revealed in its governance structure and organizational process. The research question of this study is how to develop strategy to improve the effectiveness of risk management under the constraints of a given organizational culture. The objective of this study is to show that there are fundamental differences and similarities between the governance structure and organizational process that significantly influence the effectiveness of risk management in private companies and the one in public sector organizations.
Methodology – To achieve the objective, legal documents of major public and private organizations are reviewed and key resource persons working for the organizations are interviewed.
Findings – This paper reports preliminary results that identify several important dimensions of governance structure and organizational process in both sectors that crucially influence the effectiveness of risk management.
Originality – Studies on the similarities and differences between public and private organizations in implementing risk management have been very rare. Very few studies explicitly address the effectiveness of risk management in the perspective of the comparative study. This study has never been carried out before, at least in the Indonesian context.
Downloads
References
Akbar, F., & Shahid, R. (2023). Risk management (RM) and project success (PS) of electrical power transmission and distribution systems: the moderation role of human resource management. International Journal of Energy Sector Management, 17(1), 167–186. https://doi.org/10.1108/IJESM-03-2021-0010
Alijoyo, A., & Fisabilillah, A. F. (2021). Risk Management Implementation in Public Sector Organizations: A Case Study of Indonesia. Organizational Cultures: An International Journal, 22(1), 1–23. https://doi.org/10.18848/2327-8013/CGP/v22i01/1-23
Badan Standardisasi Nasional. (2018). Risk management – Guidelines. National Standardization Agency.
Boyne, G. A. (2002). Public and Private Management: What’s the Difference? Journal of Management Studies, 39(1), 97–122. https://doi.org/10.1111/1467-6486.00284
Caemmerer, B., & Dewar, A. (2013). A Comparison Of Private And Public Sector Performance. Journal of Applied Business Research (JABR), 29(5), 1451. https://doi.org/10.19030/jabr.v29i5.8070
Carlsson-Wall, M., Kraus, K., Meidell, A., & Tran, P. (2019). Managing risk in the public sector - The interaction between vernacular and formal risk management systems. Financial Accountability & Management, 35(1), 3–19. https://doi.org/10.1111/faam.12179
Chen, J., Jiao, L., & Harrison, G. (2019). Organisational culture and enterprise risk management: The Australian not‐for‐profit context. Australian Journal of Public Administration, 78(3), 432–448. https://doi.org/10.1111/1467-8500.12382
Christopher, J., & Sarens, G. (2018). Diffusion of Corporate Risk-Management Characteristics: Perspectives of Chief Audit Executives through a Survey Approach. Australian Journal of Public Administration, 77(3), 427–441. https://doi.org/10.1111/1467-8500.12257
Cormican, K. (2014). Integrated Enterprise Risk Management: From Process to Best Practice. Modern Economy, 05(04), 401–413. https://doi.org/10.4236/me.2014.54039
Gottwald, W. D., & Mensah, G. K. (2015). Enterprise Risk Management: Factors Associated with Effective Implementation. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2735096
Grace, M. F., Leverty, J. T., Phillips, R. D., & Shimpi, P. (2015). The Value of Investing in Enterprise Risk Management. Journal of Risk and Insurance, 82(2), 289–316. https://doi.org/10.1111/jori.12022
Ilyas, S., Sustina, D., Mohd Saudi, M., & Sinaga, O. (2020). The Role of Control Environment in Developing Internal Control Effectiveness and Good Corporate Government. 58, 6038–6048. https://doi.org/10.17762/pae.v58i1.3738
Kikwasi, G. J. (2018). Risk Management Treatise for Engineering Practitioners (C. F Oduoza, Ed.). IntechOpen. https://doi.org/10.5772/62812
Kim, M., & Chai, S. (2014). Investigating a Role of Strategic Sourcing and Organizaiotnal Culture on Mitigating Risk in Supply Chain. Journal of International Logistics and Trade, 12(2), 121–139. https://doi.org/10.24006/jilt.2014.12.2.121
Meier, K. J., & O’Toole, L. J. (2011). Comparing Public and Private Management: Theoretical Expectations. Journal of Public Administration Research and Theory, 21(Supplement 3), i283–i299. https://doi.org/10.1093/jopart/mur027
Posner, P. L., & Stanton, T. H. (2014). CHAPTER 4 Risk Management and Challenges of Managing in the Public Sector.
Prewett, K., & Terry, A. (2018). COSO’s Updated Enterprise Risk Management Framework- A Quest For Depth And Clarity. Journal of Corporate Accounting & Finance, 29(3), 16–23. https://doi.org/10.1002/jcaf.22346
Priyarsono, D. S., & Munawar, Y. (2020). PENGEMBANGAN SDM UNTUK IMPLEMENTASI MANAJEMEN RISIKO: PERSPEKTIF BARU DARI SUDUT PANDANG PENGGUNA. Jurnal Aplikasi Bisnis Dan Manajemen. https://doi.org/10.17358/jabm.6.3.478
Priyarsono, D. S., Widhiani, A. P., & Sari, D. L. (2019). Starting The Implementation of Risk Management in a Higher Education Institution: The Case of IPB University. IOP Conference Series: Materials Science and Engineering, 598(1), 012107. https://doi.org/10.1088/1757-899X/598/1/012107
Rahman Khan, A., & Khandaker, S. (2016). Public and Private Organizations: How Different or Similar are They. Journal of Siberian Federal University. Humanities & Social Sciences, 9(12), 2873–2885. https://doi.org/10.17516/1997-1370-2016-9-12-2873-2885
Ranong, P. N., & Phuenngam, W. (2009). Critical success factors for effective risk management procedures in financial industries: A study from the perspectives of the financial institutions in Thailand. Umeå University.
Richards, C. H., & Corney, W. (2006). Private And Public Sector Ethics. Journal of Business & Economics Research (JBER), 4(5). https://doi.org/10.19030/jber.v4i5.2663
Saiful, S., & Ayu, D. P. (2019). RISKS MANAGEMENT AND BANK PERFORMANCE: THE EMPIRICAL EVIDENCES FROM INDONESIAN CONVENTIONAL AND ISLAMIC BANKS. International Journal of Economics and Financial Issues, 9(4), 90–94. https://doi.org/10.32479/ijefi.8078
Sheedy, E., & Canestrari‐Soh, D. S. B. (2023). Does executive accountability enhance risk management and risk culture? Accounting & Finance. https://doi.org/10.1111/acfi.13087
Silva, E. S., Wu, Y., & Ojiako, U. (2013). Developing Risk Management as a Competitive Capability. Strategic Change, 22(5–6), 281–294. https://doi.org/10.1002/jsc.1940
The Institute of Internal Auditors. (n.d.). The IIA’s Three Lines Model: An update of the Three Lines of Defense. Retrieved March 20, 2020, from https://www.theiia.org/globalassets/documents/resources/the-iias-three-lines-model-an-update-of-the-three-lines-of-defense-july-2020/three-lines-model-updated-english.pdf
Ullah, S., Majeed, A., & Popp, J. (2023). Determinants of bank’s efficiency in an emerging economy: A data envelopment analysis approach. PLOS ONE, 18(3), e0281663. https://doi.org/10.1371/journal.pone.0281663
Van Der Wal, Z., Huberts, L. E. O., Van Den Heuvel, H., & Kolthoff, E. (2006). Central Values of Government And Business: Differences, Similarities And Conflicts. Public Administration Quarterly, 30(3/4), 314–364. http://www.jstor.org/stable/41288274
Zammit, C., Grima, S., & Kizilkaya, Y. M. (2021). A Maturity Evaluation of Governance, Risk Management and Compliance (GRC) within the Maltese Public Sector 1 (pp. 219–255). https://doi.org/10.1108/S1569-375920200000105016
Zhao, X., Hwang, B.-G., & Low, S. P. (2013). Critical success factors for enterprise risk management in Chinese construction companies. Construction Management and Economics, 31(12), 1199–1214. https://doi.org/10.1080/01446193.2013.867521
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Copyright (c) 2023 Dominicus Priyarsono, Raden Racmadi Gustrian, Charles R. Vorst, Heri Supriyadi, A. Yulian, Y. Munawar
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.