The Effect of Business Risk Management in Improving Corporate Sustainability Performance with an Emphasis on the Role of Management Ability

Document Type : Research Paper

Authors

Department of Accounting, Payame Noor University, Tehran, Iran.

10.22103/jak.2023.22210.3949

Abstract

Objective: Identifying factors affecting the sustainability performance of companies has become one of the biggest concerns of researchers. Since changes in power, status and authority are inherent in businesses under different management styles, different degrees of power distance may lead to distinct strategies for corporate stakeholder engagement. Therefore, this study aims to investigate the impact of business risk management in improving corporate sustainability performance, emphasizing the role of management ability. Exposure to multiple risks can affect the stable performance of the company, and a capable manager can, by having high experience, academic and updated knowledge and skills, expertise in the relevant industry, and transferring these factors indirectly through the group. This is called the ability of management, which cannot be seen with the naked eye, to influence the bridge between risk management and corporate sustainability. In complex environments, organizations need managers who consider and separate these inherent complexities when making important decisions. Dynamic changes in the world today affect organizations from inside and outside; depending on management's ability, they create "threats" and "opportunities" for organizations and lead to transformation in business. Therefore, the life and profitability of organizations in today's chaotic conditions depend on the ability of managers to cope with rapid environmental changes and use the opportunities created. This will not be possible without using corporate risk management, which comprehensively views the organization's management of threats and opportunities. A manager is more effective if he demonstrates his ability to respond to risk. Therefore, according to the stated content, this question comes to mind: does the interaction of managers' ability and risk management affect the company's sustainability performance? In the continuation of the research structure, firstly, the development of the theoretical foundations, hypotheses and experimental foundations of the research are presented. Then, the methodology and operational definitions of the research variables are presented, and the findings and conclusions of the research are presented.
Method: The presented research is of applied type and also from the point of view of methodology; since it has been investigated after an event has occurred, it is of the type of causal and post-event correlation. The statistical population studied in this research is Tehran Stock Exchange companies and the studied period is from 2012 to 2021. In the systematic elimination, companies were selected as the final sample that met the following conditions. In terms of comparability, the financial year chosen by the company is at the end of March, and they have not changed the financial year during the period (10 years) that has been investigated, which is the information required in the research. Disclose and make this information available. Also, the companies should not be part of banks, insurance and investment companies. By applying the above conditions, 128 companies were included in the final screening of the statistical population as the final sample. The sample companies' information was analyzed using the combined panel data method, E-views 12 software, and the powerful standard error tool for the final test of the hypotheses. Time and place in different periods provide complete and reliable information to the researcher, and regression by applying the powerful standard error tool can be the best option to investigate the relationships in the current research.
Findings: Statistical results showed that risk management directly impacts corporate sustainability performance. Also, the interaction of managers' ability and business risk management can improve the level of corporate sustainability performance.
Conclusion: Sustainability is a broad concept that includes other concepts such as companies' responsibilities towards stakeholders and society. It can be examined with concepts such as competition, reporting, and social sustainability. Currently, the company's sustainability performance is in three economic, social and environmental dimensions, which refers to the responsibility of companies towards society and stakeholders. Companies with better sustainability performance perform better than their competitors in the long term in the stock market and accounting performance and are less affected by external shocks that affect the creation of value within the organization. Therefore, increasing the sustainability performance is important, which is possible with the risk management plans and eliminating risks facing the company this month. The vital role of managers in the continued life of businesses is visible because the final decision makers of companies are managers, and managers with high capabilities can help the company achieve sustainable performance by implementing risk management programs. The results that were obtained align with the research results of Asgari Rashtiani et al. By identifying risks and forming a risk committee, companies should increase the field to improve the performance of corporate sustainability by improving the efficiency of the company's performance and using capable managers to help in this field.

Keywords

Main Subjects

References

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Journal of Accounting Knowledge
Volume 15, Issue 3 - Serial Number 58
October 2024
Pages 111-132

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  • Receive Date: 19 September 2023
  • Revise Date: 28 October 2023
  • Accept Date: 29 October 2023

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