12.5 Discussions
The study found that only two out of four factors that were identified in the literature
to contribute to SRM implementation were present at all three companies, namely,
compliance and leadership. Both these factors were determined to be essential,
mainly at the initial stage of SRM implementation. The case companies were
found to have adequate controls to minimise the risk of non-compliance. Otherwise,
the companies would need to bear the unexpected costs if they fail to comply with
regulatory measures. This result is clearly in line with the study by Giannakis and
Papadopoulos (2016) which suggested that compliance with sustainability regulations and standards is one of the important factors, in addition to risk prevention and
mitigation control strategies, to reduce sustainability risks. Furthermore, effective
board oversights and senior management leadership were also found to be essential
to support SRM implementation. Based on the study done by Subramaniam et al.
(2015) which explored the integration of carbon-related risks in the ERM system in
energy and utility companies, active support of senior management was also proven
to determine the successful integration of carbon risk in the ERM system. Thus,
board oversights and senior management leadership are crucial to ensure effective
SRM implementation.
The case findings demonstrated that the need to comply with the Malaysian Code
of Corporate Governance 2012 (MCCG 2012) had created awareness among the
companies to implement SRM programme. Indeed, these requirements helped the
companies to improve their environmental and social performance. The companies
that have been considered successful in implementing SRM were not only being
driven by corporate governance compliance but also by good business practice. This
finding of the study is consistent with the studies by Manab et al. (2010) and Gates
(2006) on ERM. According to Cuomo et al. (2016), corporate governance and risk
management requirements are vital in order to stabilise, maintain, and increase the
growth of companies in the longer term. Despite the high volume of incidences like
environmental disasters, the study found that the case companies failed to manage
and quantify the sustainability risks due to lack of risk management tools. Cort and
Gudernatch (2014) suggested that dynamic risk management methodologies and
tools are needed to assess and quantify sustainability risks against traditional financial risks because sustainability risks have intrinsic long-term effects on an organisation. In addition, the result showed that the share value of one of the case
companies dropped because the board of directors appointed a number of individuals
with political interest. Due to the unethical behaviour, the risk culture of the
company became weak, and this affected its reputation and performance. Strong
risk culture is an indicator of effective risk management capabilities, whereby the
company has greater ability to proactively manage various spectrums of risk (Ashby
et al. 2012). According to Roeschmann (2014), strong governance reinforces a
positive culture, and therefore, the board should demonstrate good business practices
throughout the organisation. Other vital factors contributing to effective implementation of SRM that were highlighted and discussed in the case study were (i) good
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N. A. A. Aziz and N. A. Manab
The study found that only two out of four factors that were identified in the literature
to contribute to SRM implementation were present at all three companies, namely,
compliance and leadership. Both these factors were determined to be essential,
mainly at the initial stage of SRM implementation. The case companies were
found to have adequate controls to minimise the risk of non-compliance. Otherwise,
the companies would need to bear the unexpected costs if they fail to comply with
regulatory measures. This result is clearly in line with the study by Giannakis and
Papadopoulos (2016) which suggested that compliance with sustainability regulations and standards is one of the important factors, in addition to risk prevention and
mitigation control strategies, to reduce sustainability risks. Furthermore, effective
board oversights and senior management leadership were also found to be essential
to support SRM implementation. Based on the study done by Subramaniam et al.
(2015) which explored the integration of carbon-related risks in the ERM system in
energy and utility companies, active support of senior management was also proven
to determine the successful integration of carbon risk in the ERM system. Thus,
board oversights and senior management leadership are crucial to ensure effective
SRM implementation.
The case findings demonstrated that the need to comply with the Malaysian Code
of Corporate Governance 2012 (MCCG 2012) had created awareness among the
companies to implement SRM programme. Indeed, these requirements helped the
companies to improve their environmental and social performance. The companies
that have been considered successful in implementing SRM were not only being
driven by corporate governance compliance but also by good business practice. This
finding of the study is consistent with the studies by Manab et al. (2010) and Gates
(2006) on ERM. According to Cuomo et al. (2016), corporate governance and risk
management requirements are vital in order to stabilise, maintain, and increase the
growth of companies in the longer term. Despite the high volume of incidences like
environmental disasters, the study found that the case companies failed to manage
and quantify the sustainability risks due to lack of risk management tools. Cort and
Gudernatch (2014) suggested that dynamic risk management methodologies and
tools are needed to assess and quantify sustainability risks against traditional financial risks because sustainability risks have intrinsic long-term effects on an organisation. In addition, the result showed that the share value of one of the case
companies dropped because the board of directors appointed a number of individuals
with political interest. Due to the unethical behaviour, the risk culture of the
company became weak, and this affected its reputation and performance. Strong
risk culture is an indicator of effective risk management capabilities, whereby the
company has greater ability to proactively manage various spectrums of risk (Ashby
et al. 2012). According to Roeschmann (2014), strong governance reinforces a
positive culture, and therefore, the board should demonstrate good business practices
throughout the organisation. Other vital factors contributing to effective implementation of SRM that were highlighted and discussed in the case study were (i) good
204
N. A. A. Aziz and N. A. Manab