ENTERPRISE RISK MANAGEMENT (ERM) PRACTICES TO ACHIEVE LONG TERM AND SUSTAINABLE ORGANIZATION’S GOALS: CASE OF INSTITUT TEKNOLOGI BANDUNG (ITB)

• Main Author: Candra, Johan
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/63574
• Institution: Institut Teknologi Bandung

Every choice made in the pursuit of objectives has its risks. From day-to-day operational decisions to the fundamental trade-offs in the boardroom, dealing with uncertainty in these choices is a part of the organizational lives. A strategy is nothing more than a commitment to a set of coherent, mutually reinforcing policies or behaviours aimed at achieving a specific competitive goal. Good strategies promote alignment among diverse groups within an organization, clarify objectives and priorities, and help focus efforts around them. Diverse perspectives are critical to successful achievements. However, without a strategy to integrate and align those perspectives around common priorities, the power of diversity is blunted or, worse, becomes a significant risk to the company. Organizations regularly define their overall strategy (their scope and positioning) and specify how various functions will support it. The strategic aspect of the organization becomes an object that must be managed, especially by the top leaders of the organization. The management of the strategic aspects are carried out in a structured and systematic manner as well as measurable based on a parameter of performance targets to be achieved within a predetermined period of time. These performance targets are known as the strategic objectives of the organization, which are also a step-by-step realization of the achievement of the vision and mission of the organization. In order to ensure the implementation of efforts and the allocation of resources to achieve strategic goals, top management should conduct integrated risk management practices to all activities/initiatives of the organization's management, both individually and collectively. Risk management is an essential part that cannot be separated from planning, implementation, and decision making in every activity of the organization. No direction is taken without looking at the potential risks and comparing them against the organization's risk appetite. Risk management is a business discipline that drives deliberation and action regarding uncertainties and untapped opportunities that affect an organization’s strategy and strategy execution. Enterprise risk management is a process for identifying, assessing and managing risk, affected by internal and external events or scenarios, that could inhibit an organization’s ability to achieve its strategy and strategic objectives with the ultimate goal of creating and protecting shareholders and stakeholders’ value. Risk Management has been applied in various organizations all around the world, both private and public sectors. This indicates that they have benefitted or at least have expected to benefit from the implementation. In the public sectors or government agencies in Indonesia, risk management is very rarely implemented, despite the fact that in 2008 the government stipulated that government agencies conduct risk assessment as part of internal control system. Universities are categorized in public sector, obtain a lot of pressure from stakeholders to manage risk to achieve better performance. The enterprise risk management is not optimal to help the university reach the performance target. While major universities in advanced developed countries have implemented risk management consistently, almost none of universities in Indonesia have implemented it. At the best of author’s knowledge, there are only 3 universities in Indonesia that have started to implement risk management, i.e., Bogor Agricultural University (Institut Pertanian Bogor or IPB University), Diponegoro University (UNDIP), and University of Indonesia (UI). This final project aims to research in general the practice of enterprise risk management within Institut Teknologi Bandung (ITB) as a well-known and public-state-owned university in Indonesia. Author collects the primary data by interviewing the subject matter experts and selected academic staff, as well as distributing questionnaires to the predetermined academic staff. Author also uses secondary data from ISO-31000 and COSO standards, articles, journals, text books related to risk management disciplines, and compares the implementation of risk management with other top universities in Indonesia (i.e., UI, IPB, and UGM), and in Singapore (i.e., NUS, and NTU). The final project concludes that the enterprise risk management implementation is not fully implemented yet within ITB as an enterprise. Almost all respondents agree that the implementation of enterprise risk management has a positive and significant influence on the organization’s objectives achievement. Improving university performance overall will require an effective enterprise risk management practice. In this final project, author highly recommends ITB to adopt risk management practice based on ISO-31000 standard, and it can be combined with other risk management standards available nowadays if necessary. ITB needs to start the implementation at the soonest as possible, in order to maintain its strategic position as a top university in Indonesia, increase its competitive advantages to compete in the global scale, and at the same time achieving its vision and mission in a long-term and sustainable manner.