The Effect of the Enterprise Risk Management Quality on Firm Risks : A Case of the South African Mining Sector

The process of risk management is constantly shifting towards a more holistic and comprehensive approach, the Enterprise Risk Management (ERM) system, which is arguably more efficient than the conventional approach, the Traditional Risks Management (TRM) system. While there have been attempts to evaluate the effects of ERM on a firm's performance and value, there is limited evidence on the effect of implementing ERM on a firm's overall risk. This article examines if ERM is successful in mitigating a firm's risks and if ERM is more effective than TRM. The study commenced its selection process with 29 mining companies that were listed on the Johannesburg Stock Exchange (JSE) for at least one year between 2004 and 2015. The study used annual data gathered from Bloomberg Database and McGregor's BFA Database employed the Fixed Effects Model (FEM) to arrive at its findings. The study found that ERM quality is successful in mitigating firm risks while TRM was found to improve the level of risks faced by companies. The findings obtained by this study suggest that ERM is more effective and efficient in mitigating firm risks than TRM.