SUSTAINABILITY RISK ENTERPRISE MANAGEMENT (SREM) IN INDONESIA:FRAMEWORK DEVELOPMENT AND SECTORAL ANALYSIS

• Main Author: Deliyana Firmialy, Sita
• Format: Dissertations
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/46712
• Institution: Institut Teknologi Bandung

This study will focus on designing a comprehensive framework to measure sustainability risk of companies, specifically within the Indonesian context. Sustainability Risk in this study defines as the level of risk as threat that might deter companies ability to sustain. A higher degree of companies sustainability risk is in par with a higher degree of the company to become unsustained, and therefore it is not suitable for the business or company itself. Therefore, sustainability risk in this study remains position as the negative aspect that able to threat companies survivability. In this context, our definition aligns with the traditional view of risk, that viewed the risk as a threat. Companies’ sustainability covered two dimensions, namely, financial and non-financial aspects. However, in this study, we limit the study to focus on maintaining companies’ sustainability financially. The obtained framework will have the ability to asses the Sustainability Risk (SRISK) performance at the corporate level, specifically strategic, operational and business unit level. Multi-method analysis performed to explore the SRISK practices differ within non-financial sectors in Indonesia. This current study also will explore the possibilities of different SRISK practices between two classes of categories, namely SRISK within the controversial sector and non-controversial sector. The categorization is build given to their differences in characteristics, starting from their ownership structures, primary funding sources, their governance system and business operating process. The final framework to measure SRISK Score for each sector will consist of combination from various risk management guidelines and social rating frameworks developed by rating agencies and academics. Multiple stages of analysis combining qualitative and quantitative methodology (i.e. Thematic content analysis, Hierarchical regression, Least Squares Regression) conducted to analyze the data obtained and then validate the resulted framework statistically. In the last stage, a quantitative pilot test conducted to examine the implementation of proposed SRISK models further. 3 The research context in Indonesia, so there might be limitations when applying the results to other cultural and other geographical settings. In this dissertation thesis, we offer a useful source of information about the practical implementation of SRISK within each sector in Indonesia Stock Exchange (IDX). We focused on our analysis on Non-Financial Reporting, and we exclude the Financial Sector due to its differences in the governance system and types of regulations that controlled it. We also evaluate the practical implementation of Controversial Industries and Non-Controversial Industries. Our last contribution will focus on identifying the types of SRISK that faced each sector, as well as identify their determinants. Much of the literature within the field of practical implementation of Sustainability was focusing on Corporate Social Responsibility (CSR) and viewed CSR as philanthropic activities and political CSR. In this study, we will take a different approach, as we focused on the risk management perspectives of Sustainability to defines the SRISK. Our study confirmed the statistically significant relationship between sustainability risk and financial performance. In this study, we also found valid evidence of major key determinant influences of firm size, Board size, leverage, ownership structure, number of a female director on Board to companies sustainability risk. This dissertation brings information by providing recommendations to build an optimal SRISK strategy for Indonesian companies. Final results from this dissertation may also provide a significant suggestion for policymakers, and contribute to Indonesian’ Sustainability Law.