The challenges and opportunities for ERM post-COVID-19: Agendas for future research

Pagach, Don; Wieczo ek-Kosmala, Monika A icle The challenges and oppo uni ies o ERM pos -COVID-19: Agendas o u u e esea ch Jou nal o Risk and Financial Managemen P o ided in Coope a ion wi h: MDPI – Mul idisciplina y Digi al Publishing Ins i u e, Basel Sugges ed Ci a ion: Pagach, Don; Wieczo ek-Kosmala, Monika (2020) : The challenges and oppo uni ies o ERM pos -COVID-19: Agendas o u u e esea ch, Jou nal o Risk and Financial Managemen , ISSN 1911-8074, MDPI, Basel, Vol. 13, Iss. 12, pp. 1-10, h ps://doi.o g/10.3390/j m13120323 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/239409 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. 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I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ Jou nal o Risk and Financial Managemen A icle The Challenges and Oppo uni ies o ERM Pos -COVID-19: Agendas o Fu u e Resea ch Don Pagach 1and Monika Wieczo ek-Kosmala 2,* 1Poole College o Managemen , No h Ca olina S a e Uni e si y, Raleigh, NC 27695, USA; [email p o ec ed] 2College o Finance, Uni e si y o Economics in Ka owice, 1 Maja 50, 40-287 Ka owice, Poland *Co espondence: m.wieczo [email p o ec ed] Recei ed: 21 No embe 2020; Accep ed: 14 Decembe 2020; Published: 16 Decembe 2020   Abs ac : In his pape , we examine he impac ha COVID-19 has had on en e p ise isk managemen (ERM). Guided by he o igins and philosophy o ERM, we sugges an agenda o u u e esea ch on ERM in a “pos -COVID-19” eali y, by add essing i s in eg a ed, s a egic, and alue-enhancing o ien a ion. To guide u u e esea ch endea o s in ERM, which is s ill an e ol ing discipline, we p esen opics ha would bene i om addi ional esea ch a en ion wi hin bo h isk iden i ica ion and analysis, as well as he s a egic dimension o ERM. Keywo ds: COVID-19; pandemic; en e p ise isk managemen (ERM); isk analysis; isk epo ing 1. In oduc ion Pandemic isk has been long ecognized as a ocus o isk managemen in p ac ice; howe e , he COVID-19 pandemic has shown ha gene ic pandemic isk was unde es ima ed in bo h magni ude and dimension. En e p ise isk managemen ’s (ERM) ole is o e alua e and de ine he isks ha may a ec he o ganiza ion’s success in achie ing i s s a egic objec i es. ERM does his by helping he boa d and manage s unde s and he o ganiza ion’s isk appe i e, iden i y isks, assess he isks impac s, de elop a isk esponse, and inally communica e and moni o he isks. Ul ima ely, ERM is esponsible o helping boa ds and managemen c ea e, p ese e, and ealize alue. COVID-19 has shown ha pandemic consequences a e di icul o eliably es ima e and he pe sis ence is di icul o de ine. In his espec , pandemic isk should be pe cei ed in e ms o a se e e h ea o an en i y’s o e all s a egic objec i es and sugges s ha many o ganiza ions’ isk managemen app oaches may need subs an ial eexamina ion. No su p isingly, he COVID-19 pandemic has become a ocus o isk managemen p o essionals and will likely emain he ocus o businesses, go e nmen s, and academics, as i has caused challenges and s esses o ERM. A majo ques ion o be examined is whe he o ganiza ions ha iewed ERM as pa o hei s a egic ini ia i e can use ERM p ocesses and me hodologies o sa egua d en e p ise aspi a ions, capi al, and pe o mance while educing a iabili y in hese measu es. The concep o ERM is a ela i ely ecen phenomena, wi h an e ol ing esea ch agenda. As highligh ed ecen ly by An on and Nucu (2020), he COVID-19 impac s eme ge as a ele an gap ha needs o be add essed by he ERM- ela ed li e a u e. Thus, in his pape we concep ually iden i y he main challenges o ERM in a “pos -COVID-19” eali y. As he ERM philosophy calls o an in eg a ion o s a egic o ien ed and alue-enhancing p ocesses o iden i ying, assessing, and managing isk, we de elop sugges ions o u u e esea ch endea o s wi hin hese aspec s. Facing he cu en s age o he ERM-li e a u e de elopmen , ou s udy will add o he eme ging discussion on en e p ise isk managemen in a pandemic en i onmen . In Sec ion 2, we b ie ly discuss he main ea u es o pandemic isk and we add ess he speci ic ea u es o he COVID-19 pandemic. In Sec ion 3, we p o ide an o e iew o he ERM p ocess and J. Risk Financial Manag. 2020,13, 323; doi:10.3390/j m13120323 www.mdpi.com/jou nal/j m J. Risk Financial Manag. 2020,13, 323 2 o 10 iden i y he ela ed challenges and oppo uni ies o ERM in a “pos -COVID-19 wo ld”. In Sec ion 4 we conclude, by sugges ing a eas o u u e esea ch. 2. The Fea u es o Pandemic Risk O e 100 yea s ago, he wo ld was h ea ened by he Spanish Flu In luenza pandemic, which esul ed in app oxima ely 500 million in ec ions and an es ima ed 50 o 100 million dea hs ( Madha e al. 2017 ). Following he h ee wa es o he Spanish Flu in luenza, he wo ld expe ienced a no able economic down u n, in which de eloped coun ies’ pe capi a GDP is assumed o ha e dec eased by app oxima ely 6% on a e age (Ba o e al. 2020). The inciden s o an in luenza pandemic epea ed in 1957 (Asian Flu) and 1968 (Hong Kong Flu). In his millennium, he mos h ea ening inciden s ha e been he SARS ou b eak in 2003, he “Swine lu” in luenza in 2009, he MERS co ona i us ou b eak in 2012, he Zika i us in 2015, and he Ebola i us in 2018 (Madha e al. 2017;B oekho en e al. 2006). Howe e , he COVID-19 ou b eak is unp eceden ed compa ed o he ou b eaks ha ha e occu ed since he 1918 Spanish Flu in luenza in bo h global each and numbe o in ec ions. D i en by he u gen need o s op he sp ead o he disease, se e e es ic ions on mo emen and associa ion ha e been implemen ed globally. Lock downs, social dis ancing equi emen s, bo de closu es, a el es ic ions, and bans on mass e en s ha e all se e ely a ec ed economies and communi ies. Acco ding o WHO (2020), as o 10 h o Decembe 2020, he numbe o people con i med wi h COVID-19 exceeded 68 million, wi h he numbe o ic ims o mo e han 1.5 million, as shown in Figu e 1. In addi ion, economis s a he In e na ional Mone a y Founda ion (IMF) p edic ed ha he i us would esul in 2020 global g ow h dec easing signi ican ly, om a p e-COVID-19 o ecas o 3.4% g ow h o a pos -COVID-19 o ecas o a con ac ion o almos 5% (Jackson e al. 2020). As o he end o 2020, he e a e s ill ques ions abou he na u e o he i us, he e olu ion o he pandemic, as well as e ec i e medical ea men s and he imeline o possible accines. J. Risk Financial Manag. 2020, 13, 11 o 11 iden i y he ela ed challenges and oppo uni ies o ERM in a “pos -COVID-19 wo ld”. In Sec ion 4 we conclude, by sugges ing a eas o u u e esea ch. 2. The Fea u es o Pandemic Risk O e 100 yea s ago, he wo ld was h ea ened by he Spanish Flu In luenza pandemic, which esul ed in app oxima ely 500 million in ec ions and an es ima ed 50 o 100 million dea hs (Madha e al. 2017). Following he h ee wa es o he Spanish Flu in luenza, he wo ld expe ienced a no able economic down u n, in which de eloped coun ies’ pe capi a GDP is assumed o ha e dec eased by app oxima ely 6% on a e age (Ba o e al. 2020). The inciden s o an in luenza pandemic epea ed in 1957 (Asian Flu) and 1968 (Hong Kong Flu). In his millennium, he mos h ea ening inciden s ha e been he SARS ou b eak in 2003, he “Swine lu” in luenza in 2009, he MERS co ona i us ou b eak in 2012, he Zika i us in 2015, and he Ebola i us in 2018 (Madha e al. 2017; B oekho en e al. 2006). Howe e , he COVID-19 ou b eak is unp eceden ed compa ed o he ou b eaks ha ha e occu ed since he 1918 Spanish Flu in luenza in bo h global each and numbe o in ec ions. D i en by he u gen need o s op he sp ead o he disease, se e e es ic ions on mo emen and associa ion ha e been implemen ed globally. Lock downs, social dis ancing equi emen s, bo de closu es, a el es ic ions, and bans on mass e en s ha e all se e ely a ec ed economies and communi ies. Acco ding o WHO (2020), as o 10 h o Decembe 2020, he numbe o people con i med wi h COVID-19 exceeded 68 million, wi h he numbe o ic ims o mo e han 1.5 million, as shown in Figu e 1. In addi ion, economis s a he In e na ional Mone a y Founda ion (IMF) p edic ed ha he i us would esul in 2020 global g ow h dec easing signi ican ly, om a p e-COVID-19 o ecas o 3.4% g ow h o a pos - COVID-19 o ecas o a con ac ion o almos 5% (Jackson e al. 2020). As o he end o 2020, he e a e s ill ques ions abou he na u e o he i us, he e olu ion o he pandemic, as well as e ec i e medical ea men s and he imeline o possible accines. Figu e 1. Numbe o con i med cases acco ding o WHO, as o 10.12.2020. Sou ce: own s udy based on WHO (h ps://co id19.who.in ) (WHO 2020). As a esul o he smalle i us and lu ou b eaks om 2000 o 2015, many membe s o he global isk managemen communi y we e awa e o he se e i y o he possible consequences o a global pandemic ou b eak. In pa icula , he SARS and swine lu pandemics c ea ed he necessa y impe us o discussion on o ganiza ions’ abili ies o p ope ly iden i y and assess he isk o a pandemic, as well as managing i s consequences (T ock e al. 2015; Jonas 2014; Ve ikios e al. 2016; B oekho en e al. 2006). In addi ion, while many iew he COVID-19 pandemic as a black swan e en , he e we e no able oices s a ing ha he wo ld is inadequa ely p epa ed o a majo global pandemic ha may po en ially s ike again (Fan e al. 2018). Mo eo e , he analysis o he o e all consequences o he pandemic needs o add ess he in e play o social (loss o li es) and economic consequences (loss o income, expendi u es made o p epa e and eco e om pandemic) (Fan e al. 2018; Jonas 2014; P age e al. 2017; Keogh- B own e al. 2010; Es ada e al. 2016; Baumga e al. 2007; Woolnough and K ame 2007). Jonas (2014) discusses in de ail he mos ele an cha ac e is ics o pandemic isk, by e e ing o p io epidemic and pandemic inciden s. In gene al, al hough he haza d (in ec ious pa hogen) is 29,139,394 20,869,839 11,237,814 4,408,403 1,571,911 937,772 Ame icas Eu ope Sou h-Eas Asia Eas e n Medi e anean A ica Wes e n Paci ic Figu e 1. Numbe o con i med cases acco ding o WHO, as o 10.12.2020. Sou ce: own s udy based on WHO (h ps://co id19.who.in ) (WHO 2020). As a esul o he smalle i us and lu ou b eaks om 2000 o 2015, many membe s o he global isk managemen communi y we e awa e o he se e i y o he possible consequences o a global pandemic ou b eak. In pa icula , he SARS and swine lu pandemics c ea ed he necessa y impe us o discussion on o ganiza ions’ abili ies o p ope ly iden i y and assess he isk o a pandemic, as well as managing i s consequences (T ock e al. 2015;Jonas 2014;Ve ikios e al. 2016; B oekho en e al. 2006 ). In addi ion, while many iew he COVID-19 pandemic as a black swan e en , he e we e no able oices s a ing ha he wo ld is inadequa ely p epa ed o a majo global pandemic ha may po en ially s ike again (Fan e al. 2018). Mo eo e , he analysis o he o e all consequences o he pandemic needs o add ess he in e play o social (loss o li es) and economic consequences (loss o income, expendi u es made o p epa e and eco e om pandemic) (Fan e al. 2018;Jonas 2014;P age e al. 2017;Keogh-B own e al. 2010;Es ada e al. 2016;Baumga e al. 2007;Woolnough and K ame 2007). J. Risk Financial Manag. 2020,13, 323 3 o 10 Jonas (2014) discusses in de ail he mos ele an cha ac e is ics o pandemic isk, by e e ing o p io epidemic and pandemic inciden s. In gene al, al hough he haza d (in ec ious pa hogen) is na u al, he pandemic isk shall be classi ied as a man-made disas e , as human ac ions a e ele an o con olling he sp ead o he disease. I hese ac ions a e ine ec i e, he epidemic escala es in o a pandemic. COVID-19 is pa icula ly di icul in his con ex , as his pa hogen is easily ansmissible. The i s dimension o human ac i i ies ele an o con olling he con agion a e he ac ions ini ia ed by au ho i ies, in pa icula he na u e and imelines o he es ic ions in esponse o he sp ead o he disease. Howe e , equally ele an ac ions a e he e ec i e p ocedu es o de ec ion, con ac acing, and diagnosis o in ec ions. The au ho i ies a e also esponsible o communica ion, building public us , and enhancemen o p epa edness, which is ex emely ele an o he second dimension o human ac ions, on he indi idual le el. The beha io o he indi iduals, d i en by he unde s anding o he pandemic h ea seems essen ial o con olling he escala ion o in ec ions. The second ele an ea u e o pandemic isk is i s cascading na u e ela ed o he de elopmen and ansmission o heal h isk in o o he ypes o isk (Jonas 2014). F om he economic pe spec i e, he i s isk ha eme ges sho ly a e he pandemic ou b eak is ela ed o he insu icien labo supply. The es ic ions imposed sho ly a e he COVID-19 ou b eak ha e gene a ed u he shocks; in pa icula , loss o cus ome s and supply chain dis up ions, which has led o he d ama ic business discon inui ies. The agile business clima e ul ima ely esul s in he dis up ions in capi al low, as ela ed o he ansmissions o shocks in he inancial sys em. Jonas (2014) explained his mechanism wi h he example o he SARS ou b eak (2003), and which sugges s ha he COVID-19 pandemic will esul in a g ea e deg ee o economic down u n. Mo eo e , globaliza ion and in e connec edness o economies ampli ies he cascading consequences o he pandemic. The unique cha ac e is ics o he COVID-19 pandemic can also be add essed using isk analysis. Commonly, he impac o isk is analyzed wi h e e ence o he p obabili y o isk occu ence and he se e i y o i s consequences (A en 2016). Going beyond his iew, Renn (2008) sugges ed conside a ion o o he dimensions o isk ele an o analysis: isk ubiqui y (geog aphic dispe sion o damage), isk pe sis ence ( empo al ex ension o po en ial damage), and isk e e sibili y ( esilience and eco e y capabili ies). Fi s , Renn (2008) classi ied pandemic isk as an indecisi e isk p obabili y (as we ha e limi ed abili y o cap u e he chance o i s occu ence) bu de ined i as se e e when conside ing he ex en o he damage in e ms o he numbe o a ali ies. Following Jonas (2014), he se e i y o he COVID-19 pandemic mus be conside ed by he ansmission o heal h consequences in o economic and socie al consequences. I we conside isk ubiqui y, COVID-19 has a ec ed he whole globe in a ela i ely sho pe iod o ime. As p esen ed in Figu e 2, since he con i ma ion o i s in ec ions on 31 Decembe 2020 in Wuhan, China, o he end o Ap il 2020, almos he en i e global communi y was unde some o m o go e nmen -manda ed lock down. The sys em in e en ion measu es and es ic ions, imposed o s op he sp ead o he disease, we e belie ed needed o ensu e he su iciency o heal hca e sys ems. Howe e , such in e en ions and es ic ions p olong he du a ion o pandemic and i s pe sis ence, as explained by Linko and T ump (2019), using he example o he Ebola i us. Mo eo e , as o Oc obe 2020, ou knowledge o COVID-19, while inc easing, is s ill limi ed and hus we a e unable o p edic u he escala ion o he disease and i s ul ima e du a ion. Finally, he cascading consequences o COVID-19 in economic dimensions, as ampli ied by he globaliza ion and in e connec edness o economies, lead o a ques ioning o he iming and eco e abili y om COVID-19 pandemic consequences. As we obse ed sho ly a e he pandemic ou b eak in Eu ope o in he Uni ed S a es, he imposed es ic ions esul ed in he se e e ope a ing dis up ions o nume ous businesses and sec o s. The possible bank up cy wa es and inc ease in s uc u al unemploymen , as well as he anxie y o he business communi y and inancial sec o , may esul in u he consequences d i en by he economic down u n. J. Risk Financial Manag. 2020,13, 323 4 o 10 J. Risk Financial Manag. 2020, 13, 11 o 11 Figu e 2. Key da es in he COVID-19 imeline in he i s phase o i s escala ion. Sou ce: own s udy based on “COVID-19 imeline” by Uni ed Na ions Wo ld Tou ism O ganiza ion (h ps://unw o.o g) (UNWTO 2020). 3. ERM and Pandemic Risk and Sugges ions o Fu he Resea ch 3.1. ERM Concep : O igins and Philosophy Risk managemen has been p ac iced by o ganiza ions o cen u ies; howe e , in mos cases i was conside ed only in a na ow con ex wi h e e ence o isky e en s ha could be add essed h ough he ans e ence o isk h ough insu ance. In he 1970s and 1980s, he isk managemen discipline was mos ly ocused on inancial isk managemen coinciding wi h he eme gence and inc eased use o inancial de i a i es (C ock o d 1982; Kloman 2010; Dionne 2013). Du ing his ime, o ganiza ions managed isks mos ly wi hin he business uni o silo in which he isk esided—c edi isk wi hin inance and easu y, cus ome loyal y and e en ion wi hin sales, employee succession isk wi hin human esou ces, e c. In he mid-1990s, he isk managemen concep e ol ed u he owa d an in eg a i e, holis ic dimension, which p oposed he managemen o he po olio o isks ac oss he whole en e p ise (B omiley e al. 2015). In his con ex , he e m ERM (en e p ise-wide isk managemen ) was c ea ed, o dis inguish be ween his b oadened iew, as opposed o he p e ious na ow silo iew, o en e e ed o as adi ional isk managemen (Dickinson 2001; Hoy and Liebenbe g 2011). The o ganiza ional p ac ice o ERM is s ill ela i ely new, wi h a limi ed bu g owing numbe o academic wo ks examining i s adop ion, implemen a ion, and consequences (Beasley e al. 2015; McShane 2018; An on and Nucu 2020). O ganiza ional use o ERM began in he la e 1990s o ea ly 2000s, s a ing wi h he insu ance indus y. Howe e , he e is no amewo k o s anda d se ing o ganiza ional manda ing o ERM. In 2003, he Casual y Ac ua ial Socie y’s issued i s O e iew o En e p ise Risk Managemen (CAS 2003) ha ou lines bes p ac ices p inciples o designing and implemen ing an e ec i e ERM p ocess. Addi ional amewo ks ha e been de eloped by o he o ganiza ions, such as he Commi ee o Sponso ing O ganiza ions o he T eadway Commission (COSO 2004, 2017) and i s En e p ise Risk Managemen —In eg a ed F amewo k, he In e na ional O ganiza ion o S anda diza ion’s ISO 31000—Risk Managemen —P inciples and Guidelines (ISO 31000:2009 2009), he Uni ed Kingdom’s Co po a e Go e nance Code (UK 2012), Aus alia/New Zealand’s 4360 Risk Managemen 1 s anda d (AS/NZS 2004), and Tillinghas -Towe Pe in’s En e p ise 1 O iginally issued in 1995 and e ised in 2004 by S anda ds New Zealand, he join Aus alian/New Zealand Commi ee decided o no e ise ha s anda d in 2009 and ins ead ag eed o p omo e ISO’s 31000—Risk Managemen s anda d. Figu e 2. Key da es in he COVID-19 imeline in he i s phase o i s escala ion. Sou ce: own s udy based on “COVID-19 imeline” by Uni ed Na ions Wo ld Tou ism O ganiza ion (h ps://unw o.o g) (UNWTO 2020). 3. ERM and Pandemic Risk and Sugges ions o Fu he Resea ch 3.1. ERM Concep : O igins and Philosophy Risk managemen has been p ac iced by o ganiza ions o cen u ies; howe e , in mos cases i was conside ed only in a na ow con ex wi h e e ence o isky e en s ha could be add essed h ough he ans e ence o isk h ough insu ance. In he 1970s and 1980s, he isk managemen discipline was mos ly ocused on inancial isk managemen coinciding wi h he eme gence and inc eased use o inancial de i a i es (C ock o d 1982;Kloman 2010;Dionne 2013). Du ing his ime, o ganiza ions managed isks mos ly wi hin he business uni o silo in which he isk esided—c edi isk wi hin inance and easu y, cus ome loyal y and e en ion wi hin sales, employee succession isk wi hin human esou ces, e c. In he mid-1990s, he isk managemen concep e ol ed u he owa d an in eg a i e, holis ic dimension, which p oposed he managemen o he po olio o isks ac oss he whole en e p ise (B omiley e al. 2015). In his con ex , he e m ERM (en e p ise-wide isk managemen ) was c ea ed, o dis inguish be ween his b oadened iew, as opposed o he p e ious na ow silo iew, o en e e ed o as adi ional isk managemen (Dickinson 2001;Hoy and Liebenbe g 2011). The o ganiza ional p ac ice o ERM is s ill ela i ely new, wi h a limi ed bu g owing numbe o academic wo ks examining i s adop ion, implemen a ion, and consequences (Beasley e al. 2015; McShane 2018;An on and Nucu 2020). O ganiza ional use o ERM began in he la e 1990s o ea ly 2000s, s a ing wi h he insu ance indus y. Howe e , he e is no amewo k o s anda d se ing o ganiza ional manda ing o ERM. In 2003, he Casual y Ac ua ial Socie y’s issued i s O e iew o En e p ise Risk Managemen (CAS 2003) ha ou lines bes p ac ices p inciples o designing and implemen ing an e ec i e ERM p ocess. Addi ional amewo ks ha e been de eloped by o he o ganiza ions, such as he Commi ee o Sponso ing O ganiza ions o he T eadway Commission (COSO 2004,2017) and i s En e p ise Risk Managemen —In eg a ed F amewo k, he In e na ional O ganiza ion o S anda diza ion’s ISO 31000—Risk Managemen —P inciples and Guidelines (ISO 31000:2009 2009), he Uni ed Kingdom’s Co po a e Go e nance Code (UK 2012), Aus alia/New Zealand’s 4360 Risk Managemen 1 s anda d (AS/NZS 2004), and Tillinghas -Towe Pe in’s En e p ise Risk Managemen : An Analy ic App oach 1 O iginally issued in 1995 and e ised in 2004 by S anda ds New Zealand, he join Aus alian/New Zealand Commi ee decided o no e ise ha s anda d in 2009 and ins ead ag eed o p omo e ISO’s 31000—Risk Managemen s anda d. J. Risk Financial Manag. 2020,13, 323 5 o 10 (Miccolis and Shah 2000). Howe e , hese amewo ks only p o ide guidance o o ganiza ions and do no equi e a speci ic e sion o ERM be implemen ed. The exis ing ERM de ini ions highligh he e olu iona y con ex o ERM (Mikes and Kaplan 2015) and i s s a egic o ien a ion, designed o iden i y and manage he po olio o isk ( h ea s and oppo uni ies), o assu e he achie emen o an o ganiza ion’s objec i es (see e.g., de ini ions p o ided by Beasley e al. 2015,Lundq is 2014,o Ai e al. 2012). The boa d isk o e sigh and comp ehensi eness o ERM a e also sub-componen s o a ing e alua ions (e.g., S anda d and Poo ’s 2008,2012). Howe e , he e is g owing e idence ha o ganiza ions do no adop ERM solely o comply wi h egula o y p essu e, bu o enjoy i s di ec economic bene i s (Pagach and Wa 2011). The posi i e associa ion be ween i m pe o mance and ERM implemen a ion has been con i med by nume ous empi ical wo ks (e.g., Smi hson and Simkins 2005;Go don e al. 2009;Hoy and Liebenbe g 2011;Bax e e al. 2013;Fa ell and Gallaghe 2015; B omiley and Rau 2016;Flo io and Leoni 2017). In p ac ical e ms, he e olu ion o ERM was emboldened by how some o ganiza ions we e able o use he ERM p ocess o isk iden i ica ion, assessmen , esponse, and moni o ing o wea he isks associa ed wi h co po a e scandals (e.g., En on collapse in 2002) o as a consequence o na u al ca as ophes (Beasley e al. 2015;McShane 2018). Thus, he ERM amewo k is g ea ly conce ned wi h he alignmen o isk managemen wi h co po a e go e nance s a egies, wi h speci ic a en ion o he de ini ion o isk appe i e and boa d isk o e sigh (Be e a 2019;Beasley e al. 2015). As an on-going p ocess, ERM has se e al in e ela ed s ages (Falkne and Hiebl 2015;ISO 31000:2018 2018). I begins wi h he iden i ica ion o isk, ha is di ec ed owa d he conside a ion o he h ea s and oppo uni ies ha could a ec he o ganiza ion’s pe o mance. Nex , he assessmen o isk is pe o med, wi h he assessmen o p obabili y ( equency o occu ence) and se e i y ( he consequences, as he possible damage caused) o he p e iously iden i ied isks (B omiley and Rau 2016). The esul s o isk assessmen a e essen ial o he nex s age o he p ocess, which is he decision on he bes isk ea men me hods o be used (o en he compila ion o me hods). The spec um o he possible ea men s is summa ized by Hopkin’s (2015) p oposal, which dis inguished be ween he decision o: (i) ole a e (accep / e ain), (ii) ea (con ol/ educe), (iii) ans e (insu e/con ac ), o (i ) e mina e (a oid/elimina e). The ac ions aken wi hin he ERM p ocess shall be cons an ly moni o ed and e iewed, as well as communica ed and epo ed in e nally and o he s akeholde s. The s ages o he ERM p ocess, acco ding o he ISO amewo k, a e p esen ed in Figu e 3. Wi h e e ence o hese s ages, we lis he mos ele an pos -COVID-19 ERM challenges in he nex sec ion. J. Risk Financial Manag. 2020, 13, 11 o 11 Risk Managemen : An Analy ic App oach (Miccolis and Shah 2000). Howe e , hese amewo ks only p o ide guidance o o ganiza ions and do no equi e a speci ic e sion o ERM be implemen ed. The exis ing ERM de ini ions highligh he e olu iona y con ex o ERM (Mikes and Kaplan 2015) and i s s a egic o ien a ion, designed o iden i y and manage he po olio o isk ( h ea s and oppo uni ies), o assu e he achie emen o an o ganiza ion’s objec i es (see e.g., de ini ions p o ided by Beasley e al. 2015, Lundq is 2014, o Ai e al. 2012). The boa d isk o e sigh and comp ehensi eness o ERM a e also sub-componen s o a ing e alua ions (e.g., S anda d and Poo ’s 2008, 2012). Howe e , he e is g owing e idence ha o ganiza ions do no adop ERM solely o comply wi h egula o y p essu e, bu o enjoy i s di ec economic bene i s (Pagach and Wa 2011). The posi i e associa ion be ween i m pe o mance and ERM implemen a ion has been con i med by nume ous empi ical wo ks (e.g., Smi hson and Simkins 2005; Go don e al. 2009; Hoy and Liebenbe g 2011; Bax e e al. 2013; Fa ell and Gallaghe 2015; B omiley and Rau 2016; Flo io and Leoni 2017). In p ac ical e ms, he e olu ion o ERM was emboldened by how some o ganiza ions we e able o use he ERM p ocess o isk iden i ica ion, assessmen , esponse, and moni o ing o wea he isks associa ed wi h co po a e scandals (e.g., En on collapse in 2002) o as a consequence o na u al ca as ophes (Beasley e al. 2015; McShane 2018). Thus, he ERM amewo k is g ea ly conce ned wi h he alignmen o isk managemen wi h co po a e go e nance s a egies, wi h speci ic a en ion o he de ini ion o isk appe i e and boa d isk o e sigh (Be e a 2019; Beasley e al. 2015). As an on-going p ocess, ERM has se e al in e ela ed s ages (Falkne and Hiebl 2015; ISO 31000:2018 2018). I begins wi h he iden i ica ion o isk, ha is di ec ed owa d he conside a ion o he h ea s and oppo uni ies ha could a ec he o ganiza ion’s pe o mance. Nex , he assessmen o isk is pe o med, wi h he assessmen o p obabili y ( equency o occu ence) and se e i y ( he consequences, as he possible damage caused) o he p e iously iden i ied isks (B omiley and Rau 2016). The esul s o isk assessmen a e essen ial o he nex s age o he p ocess, which is he decision on he bes isk ea men me hods o be used (o en he compila ion o me hods). The spec um o he possible ea men s is summa ized by Hopkin’s (2015) p oposal, which dis inguished be ween he decision o: (i) ole a e (accep / e ain), (ii) ea (con ol/ educe), (iii) ans e (insu e/con ac ), o (i ) e mina e (a oid/elimina e). The ac ions aken wi hin he ERM p ocess shall be cons an ly moni o ed and e iewed, as well as communica ed and epo ed in e nally and o he s akeholde s. The s ages o he ERM p ocess, acco ding o he ISO amewo k, a e p esen ed in Figu e 3. Wi h e e ence o hese s ages, we lis he mos ele an pos -COVID-19 ERM challenges in he nex sec ion. Figu e 3. The key s ages o he en e p ise isk managemen (ERM) p ocess in acco dance wi h ISO 31000. Sou ce: own s udy based on ISO 31000:2018 2018. Figu e 3. The key s ages o he en e p ise isk managemen (ERM) p ocess in acco dance wi h ISO 31000. Sou ce: own s udy based on (ISO 31000:2018 2018). J. Risk Financial Manag. 2020,13, 323 6 o 10 3.2. ERM Pos -COVID-19 Undoub edly, wi h i s unique ea u es, he COVID-19 pandemic is an example o a ail- isk ha has ma e ialized and has a po en ial o impac ERM sys ems on an unp eceden ed scale. In esponse o he c isis caused by COVID-19, o ganiza ions ac oss he globe ha e examined hei isk iden i ica ion, analysis, and e alua ion p ocesses in o de be e espond o con inuing and new isks, communica e o s akeholde s, and be e connec isk managemen wi h s a egy. In addi ion, he c isis has unde sco ed he impo ance o ea ing ERM no jus as a equi ed egula o y equi emen bu as pa o he s a egic p ocess ha gene a es alue o an o ganiza ion. The ini ial esponse o he pandemic may be mo e in he o m o sho - e m ac ions o s abilize he o ganiza ion and see i h ough he ini ial c isis. Smi h e al. (2020) sugges ha o ganiza ions adop a h ee-phased esponse o he cu en c isis, in ol ing i s a apid esponse o u gen pandemic needs, hen shi ing esou ces o ensu e s abiliza ion and hen inally implemen ing changes o ensu e long- e m success. The ini ial esponse equi es ensu ing ha employees and o he s a e sa e, and ha he o ganiza ion has a way o communica e c i ical policies and in o ma ion o s akeholde s. In he second phase, he e is e alua ion o isks, assu ance o compliance wi h eme ging sa e y and legal p o ocols, and an examina ion o isk ecu ence. In he inal phase o esponse, an o ganiza ion should examine and implemen changes o ensu e sus ainabili y and con inued success o he o ganiza ion. I is his hi d phase ha is he ocus o his Special Issue. An ini ial esponse ha o ganiza ions should ake in he hi d phase is an examina ion o hei isk iden i ica ion p ocess. Me hods o iden i y isks a e a undamen al pa o implemen ing ERM. In addi ion, one o he mos impo an aspec s o an e ec i e and ma u e ERM p ocess is he abili y o unde s and and manage ail e en s (Da dis e al. 2020). Many o ganiza ions we e su p ised by he dep h and se e i y ha he pandemic has had on hei o ganiza ions. Gi en his, i is impo an ha o ganiza ions examine scena ios ha depic he ype o scena io he wo ld is cu en ly acing in e ms o concu en pandemic p edicamen s esul ing om demog aphic, economic, ope a ional, and s a egic isks. In his con ex , examining ERM om a s a egic lens is equi ed. This equi es examining isk scena ios wi h a special ocus on how he o ganiza ions’ mos aluable asse s and alue d i e s a e a ec ed, so ha in u u e c ises hese alue d i e s can be main ained o sus ain he o ganiza ions’ iabili y. A second impo an ac i i y ha mus ake place is an analysis o isks acing an o ganiza ion. The de elopmen o isk assessmen ools and how he alue d i e s o he o ganiza ion a e a ec ed unde a ious scena ios is he es ablishmen o “wha -i ” scena ios. In addi ion, an in es iga ion o he models ha he o ganiza ion is using o assess and analyze isks should be unde aken; a e he inpu s easonable? A e he in e ac ions oo simple o oo complex? A e he ou pu s consis en wi h he cu en economy and o ganiza ion s a egy? Wi h espec o isk iden i ica ion and isk analysis, we belie e ha he ollowing a eas o esea ch would p o ide insigh in o how ERM can be mo e e ec i e in a pos -COVID-19 en i onmen : • How ha e o ganiza ions iden i ied, assessed, and e alua ed he isks associa ed wi h pandemics, such as COVID-19 and he de i a i e isks caused by pandemic? • Wha has been he ole o ERM in iden i ying and moni o ing speci ic high-impac low-p obabili y isks? Did o ganiza ions wi h mo e ma u e ERM p ocesses a e be e in iden i ying he pandemic isk? • Wha me hodologies migh o ganiza ions use o ha e used o conside and moni o long- e m ends and he isks ha hey pose? Which me hodologies a e bes p ac ices? • Wha addi ional challenges has COVID-19 b ough o ERM? Wha new isk managemen me hods and isk esponse s a egies could help i ms be e endu e COVID-19 dis up ions in ope a ing ac i i y? A hi d impo an ERM ac i i y ha o ganiza ions should unde ake wi hin he hi d phase is an assessmen o isk s a egy. A c i ical ou come o o ganiza ions and ERM pe sonnel will be o J. Risk Financial Manag. 2020,13, 323 7 o 10 use momen um om hei c isis esponses o s eng hen he ounda ion, amewo k, and s a egy o en e p ise isk managemen , including o mal esilience p inciples (Smi h e al. 2020). Boa ds o di ec o s ha e a du y o exe cise o e sigh and moni o he co po a ion’s ope a ional iabili y, legal compliance, and inancial pe o mance. Di ec o s should egula ly moni o he impac ha COVID-19 is ha ing on he o ganiza ion’s ope a ions, unde s and how managemen is assessing he impac , and hink h ough he accep abili y o manage s’ esponse o he pandemic. Communica ion o his in o ma ion should come in bo h he managemen discussion and analysis (MD&A), as well as isk ac o s (I em 1A o SEC ile s). In his sense, he ERM p ocess can be s eng hened h ough communica ion and he u he es ablishmen o a isk cul u e. In bo h cases, he CRO will play an impo an ole in p o iding in o ma ion and epo s o he boa d and managemen , ul ima ely s eng hening he ERM o ganiza ion and i s cen alized ole. As Deans (2020) s a es, many isk manage s ha e essen ially ac ed as compliance manage s and now mus play a key ole in c isis managemen and business con inui y. Examining he ole o he CRO and communica ion, we belie e ha he ollowing a eas o esea ch would p o ide insigh in o how ERM can be mo e e ec i e in a pos -COVID-19 en i onmen : •How ha e he e ec s o COVID-19 been disclosed and communica ed? • Ha e o ganiza ions ha disclosed pandemic isk ac o s be e esponded and p e ailed du ing he COVID-19 pandemic? •How can ERM p o ide be e isk epo ing and communica ion du ing a c isis? • Ha e o ganiza ions’ disclosu e p ocesses adequa ely iden i ied COVID-19 issues ha may a ise and ensu ed ha his in o ma ion is disclosed? In addi ion, o ganiza ions should examine he impo ance ha aspec s o an o ganiza ion’s cul u e ha e on an o ganiza ion’s ERM ma u i y and sophis ica ion. This is especially ue gi en he ole o cul u e and i s ounda ional ela ion o e ec i e ERM. In ac , COSO’s (2017) ERM F amewo k emphasizes he ole o cul u e in suppo ing e ec i e ERM: En e p ise isk managemen is de ined as “The cul u e, capabili ies, and p ac ices, in eg a ed wi h s a egy-se ing and pe o mance, ha o ganiza ions ely on o manage isk in c ea ing p ese ing, and ealizing alue” (COSO 2017, p. 10). Wi h espec o isk s a egy, we belie e ha he ollowing a eas o esea ch would p o ide insigh in o how ERM can be mo e e ec i e in a pos -COVID-19 en i onmen : • Wha ole did he impo ance o ERM ma u i y play in unde s anding and esponding o COVID-19 isk? •Wha is he ole o cul u e in implemen ing a success ul ERM esponse o COVID-19? • Wha is he ole o ERM in p o iding a amewo k o o ganiza ions o unde s and he e ec ha he COVID-19 pandemic has in ans o ming inhe en isks? • Wha is he ex en o COVID-19 pandemic impac s on he ede ini ion o isk appe i e s a egies? • Wha is he ole o ERM in esponding o COVID-19 challenges, de elopmen o new isk managemen me hods, and new isk esponse s a egies in esponse o con inued dis up ions in ope a ing ac i i y? 4. Conclusions As we nea he comple ion o 2020, we know ha he global COVID-19 pandemic has c ea ed new and impo an challenges o he con empo a y e olu ion o ERM. In his pape we ha e discussed hese challenges, by e e ing o ERM philosophy and i s s a egic o ien a ion. In addi ion, we ha e iden i ied se e al b oad a eas o conce n ha would bene i om addi ional examina ion in u u e discussions. In his espec , ou pape o e s a map o possible esea ch endea o s ha may po en ially ill in he eme ging esea ch gap on he ole o ERM in esponding o COVID-19 pandemic impac s, as iden i ied ecen ly by An on and Nucu (2020). J. Risk Financial Manag. 2020,13, 323 8 o 10 In he isk iden i ica ion and isk analysis dimension, he e is a need o add ess he abili y o unde s and and manage pandemics as a ail e en , as well as o de elop he easonable scena ios o dealing wi h hese ypes o isk e en s in he u u e. Mo eo e , u u e esea ch endea o s should add ess he challenges wi hin he a ailable isk esponse s a egies o COVID-19 dis up ions, as well as he eme gence and applicabili y o new isk managemen me hods. As a second ele an agenda o u u e esea ch, we iden i ied he ole ha ERM and he CRO play in communica ing isk in o ma ion o he boa d, managemen , and s akeholde s. Disclosu e is c i ical o a company’s abili y o help use s disce n he impac ha isks and de elopmen s ela ed o he COVID-19 pandemic may ha e on he company and i s business, inancial condi ion, and esul s o ope a ions. A inal ele an agenda o u u e esea ch we iden i ied is he ole ha ERM has in o ganiza ions’ s a egic p ocess, in which ERM cul u e, ma u i y, and sophis ica ion play a signi ican ole. An e ec i e esponse o COVID-19 consequences and he enhancemen o esilience s a egies equi e an examina ion o he ole o ERM in c isis managemen . An e ec i e ERM unc ion ocused on go e nance and cul u e and which helps he o ganiza ion align isk managemen wi h s a egy will aid he o ganiza ion in iden i ying oppo uni ies ha may be missed. 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