Enterprise Risk Management (ERM) effectiveness depends not only on formal governance structures but also on how risk processes are enacted in organisational practice. This study examines the relationships between Risk Identification, Integrated Risk Assessment, Risk Control and Risk Monitoring and perceived effective ERM implementation in Malaysian Islamic banks. Drawing on an organisational routines perspective, a cross-sectional survey of 183 employees was analysed using partial least squares structural equation modelling. Integrated Risk Assessment exhibited the largest positive structural coefficient (? = .386, p < .001), followed by Risk Monitoring (? = .302, p < .001) and Risk Identification (? = .201, p = .014). Risk Control was positive but not statistically significant (? = .106, p = .087). The model accounted for 86.9% of the in-sample variance in perceived effective ERM. Several constructs were highly interrelated, so the coefficients are interpreted as conditional associations within an interconnected ERM process system. The findings provide process-level evidence from Malaysian Islamic banking and highlight the organisational relevance of integrated assessment, continuing monitoring and systematic risk identification while recognising the systemic role of risk control.
Anton, S. G., & Afloarei Nucu, A. E. (2020). Enterprise risk management: A literature review and agenda for future research. Journal of Risk and Financial Management, 13(11), Article 281. https://doi.org/10.3390/jrfm13110281
Arena, M., Arnaboldi, M., & Azzone, G. (2010). The organizational dynamics of enterprise risk management. Accounting, Organizations and Society, 35(7), 659-675. https://doi.org/10.1016/j.aos.2010.07.003
Bank Negara Malaysia. (2019). Shariah governance policy document.
Basel Committee on Banking Supervision. (2021). Revisions to the principles for the sound management of operational risk. Bank for International Settlements.
Embi, S., & Shafii, Z. (2018). The impact of Shariah governance and corporate governance on the risk management practices: Evidence from local and foreign Islamic banks in Malaysia. The Journal of Muamalat and Islamic Finance Research, 15(2), 1-20. https://doi.org/10.33102/jmifr.v15i2.174
Feldman, M. S., & Pentland, B. T. (2003). Reconceptualizing organizational routines as a source of flexibility and change. Administrative Science Quarterly, 48(1), 94-118. https://doi.org/10.2307/3556620
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24. https://doi.org/10.1108/EBR-11-2018-0203
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115-135. https://doi.org/10.1007/s11747-014-0403-8
Islamic Financial Services Board. (2025). Islamic financial services industry stability report 2025.
Ismail, I., Nik Abd Rahman, N. M., Abdul Hamid, M., & Idris, F. (2012). Assessing employee affective commitment as a mediator on the relationship between risk assessment and effective enterprise risk management (ERM). Journal of Business and Policy Research, 7(3), 60-77.
Jemaa, F. (2022). Recoupling work beyond COSO: A longitudinal case study of enterprise-wide risk management. Accounting, Organizations and Society, 103, 101369. https://doi.org/10.1016/j.aos.2022.101369
Mohd Ariffin, N. (2022). Shariah risk management practices in Malaysian Islamic banks. International Journal of Economics, Management and Accounting, 30(1), 101-123. https://doi.org/10.31436/ijema.v30i1.924
Nocco, B. W., & Stulz, R. M. (2006). Enterprise risk management: Theory and practice. Journal of Applied Corporate Finance, 18(4), 8-20. https://doi.org/10.1111/j.1745-6622.2006.00106.x
Standards Australia & Standards New Zealand. (2004). AS/NZS 4360:2004 risk management.
Ahmad, A. bin, Othman, Y. H., & Ariffin, M. S. (2026). Risk Processes and Effective Enterprise Risk Management in Malaysian Islamic Banks. International Journal of Academic Research in Business and Social Sciences, 16(9), 953–966.
Copyright: © 2026 The Author(s)
Published by Knowledge Words Publications (www.kwpublications.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
