DECLARATION

I hereby certify that this report does not incorporate any material previously submitted
for a Degree in any university or institution to the best of my knowledge and it does
not contain any material previously published or written by any other person except
where due references have been made in the text.

………………………. ………………………….
Date Signature of the student

I hereby recommend that this report was prepared under my supervision by K.A.D.N
KUMARAPELI (084211) in the partial fulfillment of the Bachelor of Science in
Insurance and Valuation (Special Degree).

Signature of the
Academic Supervisor :…………………………………………

Name :…………………………………………

Date :…………………………………………

i
Lovingly Dedicated to
My Father and Mother

ii
 ACKNOWLEDGEMENT

The completion of this dissertation report as part of my degree was a great personal
experience for me.

I would like to express my deepest sincere gratitude towards my supervisor, Ms.

Kaumadi Manodara, lecturer, Faculty of Business Studies & Finance, Wayamba
University for her proper guidance, supervision, helpful advice, guidance and sparing
her valuable time from the very early stage of this research as well as giving me
extraordinary experiences throughout the work and she provided me unflinching
encouragement and support in various ways.
I would like to also extent my special gratitude to Prof E S Wickramasinghe, Dean of
the Faculty of Business Studies & Finance. and Mrs. Champa Perera Head of the
department of Insurance & Valuation , Wayamba University of Sri Lanka and also
Mr.W.S. Sanjeewa who given me industrial training opportunity.

It is pressure to convey my special thanks for all the respondents in the Small and
Medium Scale Enterprises (SMEs) in Colombo District of Sri Lanka, parents and
friends supported me to make this study success.
Finally I would like to offer my heartiest gratitude to all the people whose names are
not appeared but their untiring effort was very much crucial to make this study
success throughout this work.

Kumarapeli K.A.D.N
May-2012

iii
 PREFACE

Enterprise risk Management (ERM) has played an important role in economic growth,
innovation, competitiveness and Business performance. This study investigates the
degree of impact of Enterprise risk Management of fifty Small and Medium Scale
Enterprises (SMEs) in Colombo District, Sri Lanka (CDSL) and effect of ERM
Dimensions including Internal Environment, Objective Setting, Event Identification,
Risk Assessment, Risk response, Control Activities, Information and Communication
and Monitoring. Interviews are used as the main instrument for data collection.
Qualitative and Quantitative techniques are applied for data analysis. Findings
indicate all Enterprise risk Management dimensions were significantly not
relationship with Business performances. This study could be useful for policy makers
to plan their activities towards risk management of Small and Medium Scale
Enterprises in Colombo District, Sri Lanka.

iv
Contents
DECLARATION........................................................................................2
ACKNOWLEDGEMENT..........................................................................4
PREFACE...................................................................................................5
CHAPTER ONE.........................................................................................8
INTRODUCTION......................................................................................8
1.1 Introduction.....................................................................................................8
1.2 Background of the study................................................................................10
1.3 Problem statement.........................................................................................12
1.4 Research questions........................................................................................14
1.5 Research objectives.......................................................................................14
1.6 Chapter organization......................................................................................14
CHAPTER TWO......................................................................................15
LITERATURE REVIEW AND THEORITICAL BACKGROUND.......15
2.1 Introduction........................................................................................................15
2.4 Eight components of ERM Frame work.............................................................17
2.8 Conceptual frame work......................................................................................24
2.9 Chapter summary................................................................................................26
CHAPTER THREE..................................................................................27
METHODOLOGY...................................................................................27
3.1 Introduction........................................................................................................27
3.4 Method of Data Analysis....................................................................................29
3.5 Chapter summary................................................................................................31
4.1Chapter Introduction............................................................................................31
4.2 Descriptive statistics of ERM and business performance of SMEs of CDSL....31
4.3 Relationship between ERM dimensions and SMEs performance......................32
4.5 Chapter summary................................................................................................44
5.1 Introduction........................................................................................................44
5.4 Suggestions.........................................................................................................45
5.4 implications........................................................................................................46
APPENDIX..............................................................................................48

v
LIST OF TABLES

Table 1-Operationalization…………………………………………………………...20
Table 2-No of Industrial projects Assisted by Industrial Development Board (IDB)
during the period 2008 to 2009……………..………………………………..24
Table 3-Statistatics of ERM and Business Performance of SMEs of CDSL.………………28
Table 4- Chi-Square Tests-Internal Environment Vs Organization Performance…...30
Table 5- Chi-Square Tests-Objective Settings Vs Organization Performance………31
Table 6- Chi-Square Tests-Event Identification Vs Organization Performance…….32
Table 7- Chi-Square Tests-Risk Assessment Vs Organization Performance………..33
Table 8- Chi-Square Tests-Risk Response Vs Organization Performance…………..34
Table 9- Chi-Square Tests-Control activities Vs Organization Performance………..35
Table 10- Chi-Square Tests-Information and Communication Vs Organization
Performance…………………………………………………………………..36
Table 11- Chi-Square Tests-Monitoring Vs Organization Performance……...……...37
Table 11- Chi-Square Tests-ERM Vs Organization Performance……….…...……...37

vi
 LIST OF FIGURES

Figure 1-COSO and New ERM Framework...........................................................15

Figure 2-The Conceptual Model..................................................................................23

vii
 CHAPTER ONE

INTRODUCTION

1.1 Introduction

Today business environment is becoming more dynamic and rapidly changing. Those
changes in internal and external business environment lead to create uncertainties
within the any organizations. The uncertainty form risks with in the environment and
it lead to impact to individuals or organizations in positively or negatively. Therefore
due to uncertainty, there is a chance to happen loss or profit to individuals or business
organizations. Then very simply risk can b
e defined as chance of happening losses. Today we can identify there are various types
of risks are involving in business environment such as business risk, credit risk,
liquidity risk, market risk and as well as hazard risks.
Risk management is a rapidly developing discipline and there are many and
varied views and descriptions of what risk management involves, how it should be
conducted? Risk management is playing vital role in any organization to day and it
lead to enhance survival of any organization. Risk management is a central part of any
organization’s strategic management. It is the process whereby organizations
methodically address the risks attaching to their activities with the goal of achieving
sustained benefit within each activity and across the entire activities. Though
businesses is well organized such as companies or do not well organized such as
Small and Medium Enterprises are facing different types of risks when they are
running the businesses and Risk management is playing vital role within this risky
environment.
Enterprise Risk Management (ERM) framework is the landmark model serves
as a broadly accepted benchmark to help organizations enhance their risk management
efforts. Detailing the essential components of an effective Enterprise Risk
Management process, the framework provides guidance to help organizations build
effective programs for identifying, measuring, prioritizing, and responding to risk. In
addition, the Enterprise Risk Management frame work provides direction to enhance
risk management, including criteria for companies to use in determining whether their
risk management is effective, and if not, what is needed.
Enterprise Risk Management (ERM) frame work is becoming an increasingly
important aspect of managing a business in today’s complex, dynamic, and intensely
competitive global marketplace. Organizations assign the growing responsibilities to
perform effective risk management practices to different positions, including
management, accountants and internal auditors. ERM frame work provides greater
value when it builds in risk management as an intrinsic component for all business
processes. ERM frame work is differing from traditional risk management techniques
and it is integrated holistic concept towards the risk management. ERM frame work
can be applied to every organization regardless of the size. However the manner in
which the components are applied will depend on the nature and size of the
organization.
All developed and developing countries have recognized the importance of the
development of Small and Medium Enterprises (SMEs), because, they play a
significant role in economic development. Small and Medium Enterprises (SMEs)
perform as a useful vehicle for economic growth of countries because they have the
capacity to achieve rapid economic growth, while generating a considerable extent of
employment opportunities. Promotion of Small and Medium Enterprises (SMEs)
results in the increase in industrial output of a country and thereby increases the share
of the industrial output in Gross Domestic Product (GDP) and finally it may enable to
maintain a significant economic growth together with rapid industrialization.
Small and Medium Enterprises (SMEs) play a vital role in the economy of Sri
Lanka. SMEs have been recognized as an important strategic sector in Sri Lanka for
generating high economic growth, reducing unemployment, inequality and poverty
(Ministry of Enterprise Development, 2002). Sri Lanka’s economy is predominantly a
Small and Medium Enterprise economy where over 50 % of Gross Domestic Product
is produced by the SME sector.
 1.2 Background of the study

Enterprise Risk Management is a best tool for manage risks that face any organization
or any industry. It is integrated approach to enhance ability of manage all kinds of
risks that organization faced. In currently Enterprise Risk Management is playing
significant role in any organization and it will lead to open the door to achieve their
organizational goals and objectives in effective manner. Most of the countries and
their organizations are adopt to practice enterprise Risk Management as their risk
management tool rather than practicing traditional risk management practices.
Risk management is a central part of any organization’s strategic management
and currently it is playing vital role in any business. It is the process whereby
organizations methodically address the risks attaching to their activities with the goal
of achieving sustained benefit within each activity and across the entire activities.
Even it is small and medium scale business, uncertainties and risks highly affect their
ordinary business activities.
There are various important Enterprise Risk Management (ERM) frameworks,
each of which describes an approach for identifying, analyzing, responding to, and
monitoring risks and opportunities, within the internal and external environment
within any organization.
In Small and Medium Enterprises (SME) sector have varies type risks related
their business activities. There are various types of internal and external changes in
the SME sector and those changes are lead to create uncertainties to their ordinary
level activities. In Sri Lankan context, Small and Medium Enterprises are facing
varies types of problems such as a lack of capital and credit facilities; shortage of
skilled workers and raw materials; inadequate infrastructure; lack of managerial,
marketing and technical expertise; and limited applications of new technology. In
addition, external environmental factors, such as fast changing technology,
competition, economics, socio-cultural and international factors also have a
significant effect on the success and failure of Small and Medium Enterprises.
All those problems are lead to create varies types of risks in their business
activities and it will badly affect to their activities. It is generally accepted that SMEs
are high-risk industry, and SME’s risk management capability becomes the most
important capability for its survival and continuous development. Especially SMEs
should have to proper risk management practices in order to achieve their goals.
SMEs are preserving their own purity and integrity, so that their risk management
tasks become more difficult with their existing capabilities.
Therefore it is obvious that this research study on impact of Enterprise Risk
Management (ERM) and organization performances in SMEs. As mention above
SME sector have various types of inherent risks and also risks related their internal
control systems. From beginning their business processes, they are facing different
types of business risks and due to external environment factors and its changes SMEs
face some another risks. Those types of risks emphasize need of best Risk
Management Practices for their business activities such as ERM. The reality is that
the majority of owner managers of SMEs still do not understand what is expected
when implementing a risk management program.
When considering SME sector in Sri Lanka, they are doing their business
activities with dynamic environmental factors. There are some inherent limitations in
the SME sector and those circumstances are badly affected to development of the
sector. Due to those inherent limitations and environmental changes SMEs are facing
varies types of risk associated business activities even though they do not consider
about those factors. Further more in Sri Lankan context, SMEs have lack of internal
control frameworks and application of internal control framework is at lower level.

1.3 Significance of the study

SMEs are playing vital role in economic development of the Sri Lanka and
SMEs are contributed to GDP at higher level in currently. SMEs are providing
solutions for economic problems such as unemployment, under utilization of
resources and rural development. Then it is necessary to investigate real picture about
SMEs and it is assist them to uplift their business position. SMEs are having different
types of risks with in their context and those risks are badly affecting to future
development of the sector and therefore it is important to identify their risk
management practices and what is their perception intend to implementing ERM
framework within their business context.
 Development of SMEs is significant in the developing countries like Sri
Lanka, which suffered from problems of unemployment, lack of investment, balance
of payment, poverty etc. because, growth of SMEs provides a solution for the
complex economic problems of a country and it is important to study on their related
risk and control system in order to get higher benefit from the sector.
SMEs have the capacity to achieve economic growth faster in view of their
high employment potential, small gestation period and relatively limited financial
requirements.’ They help to solve unemployment problem to a considerable extent
and also create more employment opportunities than that of large industries, since
they are labor-intensive industries
Resources dispersed all over the country can be utilized efficiently and
economically in developing SMEs and they help to develop the rural sector as well.
Problem of income inequality, balance of payment, lack of capital, technology etc can
be solved by promoting SMEs, and they help to increase countries' national income,
thereby enhance the living standard of the people.
All in all it can be concluded that this research can provide valuable
information about Enterprise Risk management system (ERM) and its impact on
SMEs performances and ERM practices in SMEs. As Sri Lankan economy is going
through a critical phase at the movement, the findings of this research will be
contributive to the economic development of the country.

1.4 Problem statement

In Sri Lankan context SMEs are facing different type of risks in their business
activities and due to those risks they are facing some losses. Problems in the SME
sector will lead to create uncertainties in the sector and it will badly affect to
performances in SMEs. SME sector is running their businesses activities at low level
due to those uncertainties and risks. For most SMEs there is little point in addressing
one category of risk without addressing risks across the whole of their business. Then
it is interesting to find out impact of risk management tools and business
performances of SMEs.
ERM system is the integrated tool for manage organization’s risks in order to
achieve their short term and long term goals and objectives. There are eight
components in ERM frame work and every component is not functioning well in
every organization or every sector. Some time those components are functioning well
structured organizations rather than SMEs and some time it is functioning properly
with in SMEs. Ultimately Effective ERM frame work leads to enhance performance
in any organizations.
Further some researchers belief that Enterprise Risk Management is best risk
management tool for unstructured organizations such as Small and Medium scale
businesses (SMEs) and also they emphasize that even Small businesses are
functioning Enterprise Risk Management components properly rather than well
developed organizations. Therefore it is researchable area to find out whether ERM
frame work components are functioning well or not in the Small and Medium scale
businesses (SMEs).
SMEs seek to meet their risk management needs through informal practices
and it is possible that they will have place big problems. In Sri Lankan context there is
high probability to collapse SMEs due to those internal and external uncertainties and
ultimately it will affect to economy in badly. Therefore, it is obvious that this research
study on impact on Enterprise Risk Management (ERM) and SMEs performances. In
this research the researcher aims to look in to both ERM components and its practices
with in SMEs.

1.5 Research questions

There are two Research questions relating to this study as follows:

i. How Enterprise Risk Management (ERM) frame work impact on
organization’s performances in SME sector?
ii. How Enterprise Risk Management (ERM) practice in Small and
medium Enterprises (SMEs)?

1.6 Research objectives

According to research questions, the objectives of this study are

i. to Identify impact of Enterprise Risk Management (ERM) system on
organization’s performances in Small and medium Enterprises (SMEs)
ii. to identify Enterprise Risk Management (ERM)practices in Small and
medium Enterprises (SMEs) in Sri Lanka
 1.7 Chapter organization

The chapter one includes the introduction regarding the study carried out and
the objectives of the study. In this chapter includes introduction to study, back ground,
significant, questions and objectives of the study. It consist descriptions under above
headings and real picture of this study.
The second chapter presents the literature review and it will make a solid
foundation to this study exploring the research gap and theories. It will provide
theoretical back ground of the research and relevant and related past studies on this
research and previous findings. Conceptual model and framework developed through
past literatures’ included in this chapter.
The chapter three indicates how the research has designed to conduct and the
methodology. Sampling design and data collection method are including this chapter.
This study is mostly based on primary data collected from SMEs selected and Data
was mainly collected through a structured questionnaire; in addition, by interviewing
entrepreneurs and observing industries.
Chapter four and five gives details regarding the data interpretation and
analysis and conclusion suggestions and policy implications.
 CHAPTER TWO

LITERATURE REVIEW AND THEORITICAL BACKGROUND

2.1 Introduction

In the literature review of this research, it is important to study past literature

reviews and theoretical background on Enterprise Risk Management and Small and
Medium scale Enterprises. In the background of the ERM framework, can conclude
that ERM frame work COSO model and characteristics of its components. It is
significant to produce past relevant studies on Small and Medium Enterprises (SMEs)
in Sri Lanka with regards to Risk Management.

2.2 Overview of the Risk and ERM Frame work

Risk is a common business issue and it is always a topic full of ambiguity and
complexity. The understanding and awareness of risk to both professionals and
individuals, including the sophistication of risk management techniques, have
increased remarkably in the past few years (Bernstein, 2000).
However, the professional status of risk management as a mainstream business
discipline (e.g., accounting, marketing, strategy, etc) has yet to evolve. Interestingly,
the evolution of Enterprise Risk Management (hereafter referred to as ERM) has
emerged both as a concept and a management function (Dickinson 2001).
In operational views ERM is defined as a management process of risk in an
enterprise-wide framework (Moeller, 2007) where controlling of risk is preferred.
Finally, in strategic views, ERM is intended to reduce the degree of failure in
achieving organizational strategic goals over a period of time (Dickinson 2001). It is
found that these views hold uneven understanding of risk and their consequences.
Furthermore, the views often depend on the role and position of the risk management
expert in the management hierarchy.
The common issue is that ERM is a holistic approach to managing the risks of
a modern dynamic business enterprise irrespective of their nature and sources.
However, the varying adaption of approaches is important in its implementation in a
particular business to achieve its business goals within the constraints of available
resource, culture, regulatory, market, and social environments.

2.3 COSO and New ERM Framework

The Committee of Sponsoring Organizations of the Treadway Commission

(COSO) has issued its long-awaited Enterprise Risk Management - Integrated
Framework, as well as a detailed practical application guide, and key components and
risk-management principles for organizations regardless of size. The COSO
Enterprise Risk Management framework provides a foundation of ERM (Moeller,
2007).
Designed to offer organizations a commonly accepted model for evaluating
risk management efforts, the framework expands on internal control concepts by
providing a more robust focus based on the broader subject of enterprise risk
management (ERM). Detailing the essential components of an effective ERM process,
the framework provides guidance to help organizations build effective programs for
identifying, measuring, prioritizing, and responding to risk.
In addition, the new framework presents a standard definition of risk and ERM
and provides direction to enhance risk management, including criteria for companies
to use in determining whether their risk management is effective, and if not, what is
needed.
When considering activities at all levels of the organization, the ERM
framework views entity objectives at the entity, division, business-unit, and subsidiary
levels, in four key categories: strategic, operations, reporting, and compliance. At the
same time, the framework focuses on eight interrelated components: internal
environment, objective setting, event identification, risk assessment, risk response,
control activities, information and communication, and monitoring.
 Figure 2.1 COSO and New ERM Framework

Source: The Committee of Sponsoring Organizations of the Treadway Commission

(COSO)
2.4 Eight components of ERM Frame work

According to COSO New ERM Framework, the researcher used one

dimension which is having eight components in the model to implement this research
and COSO consists of eight interrelated components: Internal Environment, Objective
Setting, Event Identification, Risk Assessment, control environment, risk assessment,
Risk Response, control activities, information and communication, and monitoring.
The researcher is going to re-search whether those components are properly
functioning or not in the context of SMEs selected in Colombo District.
Internal Environment-The internal environment encompasses the tone of an
organization, and sets the basis for how risk is viewed and addressed by an entity’s
people, including risk management philosophy and risk appetite, integrity and ethical
values, and the environment in which they operate.
Objective Setting-Objectives must exist before management can identify
potential events affecting their achievement. Enterprise risk management ensures that
management has in place a process to set objectives and that the chosen objectives
support and align with the entity’s mission and are consistent with its risk appetite.
Event Identification-Internal and external events affecting achievement of an
entity’s objectives must be identified, distinguishing between risks and opportunities.
Opportunities are channeled back to management’s strategy or objective-setting
processes.
 Risk Assessment-Risks are analyzed, considering likelihood and impact, as a
basis for determining how they should be managed. Risks are assessed on an inherent
and residual basis.
Risk Response-Management selects risk responses – avoiding, accepting,
reducing, or sharing risk – developing a set of actions to align risks with the entity’s
risk tolerances and risk appetite.
Control Activities-Policies and procedures are established and implemented to
help ensure the risk responses are effectively carried out.
Information and Communication-Relevant information is identified, captured,
and communicated in a form and timeframe that enable people to carry out their
responsibilities. Effective communication also occurs in a broader sense, flowing
down, across, and up the entity.
Monitoring-The entirety of enterprise risk management is monitored and
modifications made as necessary.

2.5 Benefits of implementing COSO's ERM framework

According to advocates of the ERM framework, organizations that implement the

process will have:
i. A greater likelihood of achieving business objectives.
Business can achieve their organizational objectives very effectively and
efficiency through implementing ERM frame work within the organization.
ii. Consolidated reporting of disparate risks at the board level.
Organization can identify their potential risks and uncertainties in smoothly
and can react for those risks in effective manner and broad sense.
iii. Improved understanding of the key risks facing the organization.
Organization can improve their understanding level of the key risks that they
are facing in ordinary level activities within the organization.
iv. Greater management focus on risks that really matter.
Management can easily focus on risks effectively through implementing
effective ERM framework and they can identify real picture about risks.
v. More focus internally on doing the right things in the right way.
Organization can enhance their internal control system within the organization
in order to doing right things in right way and it is lead to uplift organization
performances in effectively.
vi. More informed risk-taking and decision-making.
 Best ERM frame work enhance the ability of getting decisions with risky
environment and it will make decision making process in correct path.

2.6 Small and Medium Enterprises in Sri Lanka

According to Gamage (2003), Small and Medium Enterprises (SMEs) play an

important role in any economy through generation of employment, contributing to the
growth of G.D.P, embarking on innovations and simulating of other economic
activities. This sector is said to be the backbone of all developed and developing
nations. So, the development of this sector is of paramount importance for any
country, irrespective of their level of development.
Small and medium sized sector is increasingly recognized as a prime vehicle
for economic development of both developed and developing nations (Zacharakis et
al 2002.). it is major source of employment, revenue generation, innovation and
technological advancement ( Kotey and Meridith, 1997). In some industries, SMEs
are more effective than the larger firms ( Kotey and Meridith, 1997). Therefore, SMEs
have become a major asset in the economy.
All developed and developing countries have recognized the importance of the
development of Small and Medium Enterprises (SMEs), because, they play a
significant role in economic development. SMEs perform as a useful vehicle for
economic growth of countries because they have the capacity to achieve rapid
economic growth, while generating a considerable extent of employment
opportunities (Reddy, 1991:2).
Wijewardena.H. (1989) status that a significant portion or small industry in Sri
Lanka includes variety of very small enterprises of the cottage and house hold – types
and their activities are often concealed from the state for a variety of reasons such as
business registration, labor regulations, taxation and provident fund contributions. For
this reason and also because of the well-known problem of the data collection, the
activities of this sector normally do not feature in official statistics. It is under such
data constraints that this paper attempts to examine the structure, features and growth
performance of Small industry in Sri Lanka.
According to the central Bank of Sri Lanka (2010), the cottage and small scale
industries (CSSI) sector plays an important role in economic development through
creation of employment opportunities, the mobilization of domestic savings, poverty
alleviation, income distribution, regional development, training of workers and
entrepreneurs, creating an economic environment in which large firm flourish and
contribute to export earnings. Having understood the positive impact of SMEs
development and economic growth, successive government in Sri Lanka has taken
various steps to develop this vital sector.
Gamage (2003) describes that in Sri Lanka there is no clear definition for
SMEs. Different government agencies are different criteria to identify SMEs. Among
these criteria are the number of employees, firm size of fixed investment and nature of
the business and the sector; ie formal or informal, in which the industry operates.
There are different terms uses in different documents to identify this sector. Small and
Medium industries or enterprises, micro enterprises, rural enterprises, small and
medium activities, cottage and small scale industry etc are some terms frequently
used.
Using the size of capital and number of employees as the criteria the Industrial
Development Board (IDB) defines a small industry as an establishment whose capial
investment in plant and machinery does not exceed Rs.4 million and the total number
of regular employees does not exceed 50 persons (central Bank of Sri Lanka, 1998).
The department of Small Industries (DSI) classifies enterprises with capital
investment of less than Rs.5 million and fewer than 50 employees as SMEs
(Ponnamperuma, 2000).
For the purpose of assistant of programs implemented by the Sri Lankan
Export Development Board (SLEDB) for export oriented enterprises, SMEs are
define as those enterprises with capital investment excluding land and buildings of
less than Rs.8 millionor with annual export turnover of less than Rs.50 million
(Hewaliyanage, 2001). The World Bank defines enterprise size in Sri Lanka based on
the number of employees: those with fewer than 49 employees are small; those with
50-99 employees are medium sized: and those with more than 100 employees are
large. The number of emplees as the criterion for size appears reasonable because it
distinguishes between enterprises regardless the line of business and the amount of
capital investment must be revised frequently due to inflation (Ponnamperuma, 2000).

2.7 Conceptual Model

 The researcher uses a COSO model developed by The Committee of
Sponsoring Organizations (COSO) of the Tread way Commission. ERM framework is
in form of three dimensional matrixes in shape of a cube. The matrix includes four
categories of objectives at the top strategic, operations; compliance & reporting. There
are eight components of ERM are represented by horizontal rows. Each component
row “cuts across'' and applies to all four objectives categories. The entity , its
divisions and business units are depicted as third dimension. ERM is equally relevant
to an entire enterprise or to an individual business unit.
For this research study, based on COSO model the researcher has developed
the following model that measure SMEs performance with one dimension and
effectiveness of ERM along eight dimensions
 Figure 2.2 – The Conceptual Model

Internal

Environment

Objective

settings Business
Enterprise
performanc
Risk Event
e in SME
Managem identification
sector
ent
Risk assessment

Risk response

Control Sales growth

activities

Information and

communication
Source - COSO New ERM Framework and past literatures
Monitoring

Out of the three dimensions in COSO model researcher selected one

dimension to check whether those eight components are functioning well or not in the
context of SMEs. There are Internal Environment, Objective settings, Event
identification, Risk assessment, Risk response, Control activities, Information and
communication Monitor ring. Those dimensions are selected to measure the
effectiveness of the ERM frame work towards the performances of SMEs.
This model consists of two key variables of them effectiveness of ERM frame
work is the independent variable which the dependent variable is performances of
SMEs. The independent variable measured along eight dimensions namely, Internal
Environment, Objective settings, Event identification, Risk assessment, Risk
response, Control activities, Information and communication Monitor ring. Lumpkin
and Dess (1995) used accounting measures such as sales growth, market share and
profitability alongside indicators of overall performance as well as other indicators of
owner manager satisfaction.
The effective ERM frame work affect to performances of SMEs, and the
researcher use the dependent variable is measured along two dimensions namely Sales
growth and owner manager satisfaction.

2.8 Conceptual frame work

Table 2.1 Operationalization

Independent variables
ERM framework components
Dimensions Indicators Measurement

Effectiveness of organizational
Internal structure Five point likert
Environment Management’s effectiveness and scale
competence
Management philosophy and operating
style
Setting corporate strategy ,overall
Objective Settings direction, mission and vision Five point likert
Specifying achievable objectives scale
Developing strategies and setting
policy guidelines.
Setting Event inventories
Event Identification Escalation or threshold triggers Five point likert
Leading event indicators
scale
Setting objectives
Risk Assessment Analyzing related risks Five point likert
Managing changes
scale
Selection of the most appropriate
Risk Response response(s) to risk.
 Effectiveness of risk response tools Five point likert
that firm used. scale
Degree of effective Risk assessment.
Business performance reviews
Control Activities Information processing (including Five point likert
application controls and IT general scale
control)
Physical control
Pertinent information identified,
Information and capture and communicated in timely Five point likert
Communication manner. scale
High level of Access to internal and
externally generated information.
Identify and document the significant
processes for key financial statement
areas.
Assessment of control system’s
Monitoring performance over time. Five point likert
Combination of ongoing and separate scale
evaluation
Owner Manager’s supervisory activity
Proper Internal audit activities.

Dependent Variable
Performance of SMEs
Dimensions Indicators Measurement
Sales growth Sales amount Growth rate
2.9 Chapter summary

This chapter contains selected pieces of ERM frame work literature originated
from previous studies on the subject of ERM frame work and its implementation. It
includes introduction to COSO and New ERM Framework and its origin, 0verview of
the Risk and ERM Frame work components of COSO New ERM Framework,
Benefits of implementing COSO's ERM framework, Small and Medium Enterprises
in Sri Lanka, a conceptual model and conceptual frame work.
 CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter deals with how the researcher carried out the researcher carried
out the research in respect of selecting sample size, collecting primary data and
methods use data analysis. Furthermore it discusses the way of evaluating the
collected data by using different statistical techniques.

3.2 Sample of the study

Sampling is the systematic tool that help to do research in correct manner
when population large and distribute large geographical aria. The sample was one of
important factor in a research. Sampling means the elements of sampling units who is
to be served from the population. Sample size means how many people should be
surveyed from population to represent them and sampling procedure means how the
respondent should be chosen.
The sample consists of SMEs in Colombo district. Colombo District in
Western province has the highest number of industrial establishments of SMEs in Sri
Lanka and also high contribution to Gross Domestic Product (GDP) (Central Bank of
Sri Lanka, 2007). In order to draw the sample, selected population of SMEs in
different areas according to No of new industries commissioned and No of existing
industries developed by Industrial Development Board (IDB) year 2009 and 2010.
For this research necessary data are gathered through SMEs in Colombo District. The
total population of the SMEs in Colombo district according to 2009/2010 No of new
industries commissioned and No of existing industries developed by Industrial
Development Board (IDB).
Table 3.1 - No of Industrial projects Assisted by Industrial Development Board (IDB)
during the period 2008 to 2009
Year Assist to commence new Assist to Develop Existing
Enterprises Enterprises

No of Investmen Emp. No of Addl. Addl.

Units t Units Investment Emp.
(Rs)
2008 8 24345000 45 25 13005000 73
2009 18 84560000 117 35 19304000 142
Total 26 10890500 162 60 32309000 215
0

Source: Industrial projects Report 2010, Industrial Development Board (IDB)

Researcher selected 50 SMEs, Out of 86 SMEs Assisted Industrial

Development Board (IDB) in 2009 and 2010. That forty (40) SMEs selected from
proportion based from Assist to commence new Enterprises and Assist to Develop
Existing Enterprises in 2009 and 2010 by using simple random sampling technique.

3.3 Data Collection

In the scenario of collection of collection of data the study used primary data
only in order to have information from SMEs. Therefore data gathering was carried
out by using the questionnaires plus direct interviewing method.
The question aims consist two major categories regarding ERM frame work
and SMEs performance.
To evaluate Effectiveness of ERM framework in SMEs perspectives,
indicators such as Internal Environment, Objective setting, Event identification, Risk
assessment, Risk Response, Control Activities, Information and Communication
Monitoring. These all indicators were get from COSO model in ERM frame work.
Also indicators such as yearly turnover and owner manager satisfaction were used for
measure performance of SMEs.

These data are collected using five main categories, which mention below.
 5 : As excellent
4 : Good
3 : Fair
2 : Poor
1 : Not at all

3.4 Method of Data Analysis

To extend the objectives of the research, both qualitative and quantitative
methods were used to analyze data. Primary data was analyzed by using descriptive
statistical techniques and multiple regression analysis was used to determine the
relationship among COSO ERM framework dimensions and business performance
variables. The degree of ERM of SMEs was determined by the mean value.
Significance of the relationship among variables was established based on the results
of Pearson correlation analysis.

3.4.1 Descriptive Statistical Techniques

These techniques were used to discover and summarize was provided
descriptive information such as mean, standard deviation and variance. it was helpful
to analyze the current situation in selected dimensions.

3.4.2 Pearson’s chi-square analysis

In general the chi-square analysis is used when there is a need to examine the
similarities between two or more variables on some characteristics of interest and
Person chi-square analysis describes association / relationship between two variables.
Researcher use person chi-square analysis to determine whether there is relationship
between ERM dimensions and SMEs performance. In order to achieve first objective
researcher developed following hypothesis as follows,

H1: There is a significant relationship between internal environment and Business

performance
H2: There is a significant relationship between objective setting and Business
performance
H3: There is a significant relationship between Event Identification and Business
performance
H4: There is a significant relationship between Risk Assessment and Business
performance
H5: There is a significant relationship between Risk Response and Business
performance
H6: There is a significant relationship between Control Activities and Business
performance
H7: There is a significant relationship between Information and Communication and
Business performance
H8: There is a significant relationship between Monitoring and Business performance
H9: There is a significant relationship between Overall ERM and Business
performance

3.5 Chapter summary

This research refers to the impact on ERM framework and performance of
SMEs. Research done by using selected SMEs in Colombo District. Data needed to
the research is collected through the primary collection techniques.
Data that collected analyzed by using main two techniques i.e. Descriptive
statistics and Regression analysis. To evaluate the independent variables five point
liker scale built by the researcher and to evaluate the dependent variable get average
annual sales.
 CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

4.1Chapter Introduction
This chapter deals with the interpretation and presentation of all analytical
data. In this chapter the researcher presents analyzed data in order to get understand
about ERM practices and SME’s performance. Statistical tools such as descriptive
statistics, person chi-square analysis were use to analyzed collected data to get real
picture with regards to ERM and SMEs performance.

4.2 Descriptive statistics of ERM and business performance of SMEs of

CDSL
Mean values and standard deviation of ERM dimensions and business
performance variables were shown in Table 4.1 as follows.
Table 4.1 Descriptive statistics of ERM and business performance of SMEs of
CDSL
ERM variables Mean Std Deviation
Internal Environment 3.5933 0.4532
Objective Settings 2.3200 0.4362
Event Identification 1.3600 0.3000
Risk Assessment 2.3267 0.4441
Risk Response 2.0533 0.4005
Control Activities 3.2400 0.5086
Information and Communication 2.9000 0.4429
Monitoring 2.7133 0.3500
ERM 2.5633 0.2640
Business performance variables
Sales growth 8.753 4.237
Owner Manager Satisfaction 4.160 0.766
Overall Business Performance 6.457 2.286

Source: Primary Data

In table 03 indicates that Internal Environment mean value was higher than all
other ERM dimensions and a dimension which has lowest mean value is Event
Identification of SMEs in CDSL. Sales growth is a dimension which has highest mean
value in Business performance variables.
4.3 Relationship between ERM dimensions and SMEs performance
Person chi-square analysis were use to determine association of each ERM
dimensions with business performance of SMEs in CDSL.

4.3.1 Relationship between Internal environment and SMEs performance

H0: There is not significant relationship between internal environment and Business
Performance
H1: There is a significant relationship internal environment and Business Performance
These results indicate that there is no statistically significant relationship between
Internal Environment and Business Performance at 0.05 significant levels. (P>0.05)

Table 4.2 Chi-Square Tests-Internal Environment Vs Organization Performance

Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .079a 1 .778

Continuity .000 1 1.000

Correctionb
Likelihood Ratio .080 1 .777

a. 2 cells (50.0%) have expected count less than 5. The minimum

expected count is 3.36.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 01)
4.3.2 Relationship between Objective setting and Business Performance

H0: There is no significant relationship between objective setting and Business

Performance
H1: There is a significant relationship between objective setting and Business
Performance
These results indicate that there is no statistically significant relationship between
objective setting and Business Performance at 0.05 significant levels. (P>0.05)

Table 4.3 Chi-Square Tests-Objective Setting Vs Organization Performance

Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .000a 1 .991

Continuity .000 1 1.000

Correctionb
Likelihood Ratio .000 1 .991

a. 2 cells (50.0%) have expected count less than 5. The minimum

expected count is 7.98.
b. Computed only for a 2x2 table
Source: Primary Data
(Appendix 02)
4.3.3. Relationship between Event Identification and Business Performance
H0: There is no significant relationship between Event Identification and Business
Performance
H1: There is a significant relationship between Event Identification and Business
Performance
Results indicate that there is no statistically significant relationship between Event
Identification and Business Performance at 0.05 significant levels (P>0.05)

Table 4.3 Chi-Square Tests-Event Identification Vs Organization Performance

Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .160a 1 .689

Continuity .010 1 .920

Correctionb
Likelihood Ratio .159 1 .690

a. 0 cells (0.0%) have expected count less than 5. The minimum expected count is
7.33.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 03).
4.3.4 Relationship between Risk Assessment and Business Performance

H0: There is no significant relationship between Risk Assessment and Business

Performance
H1: There is a significant relationship between Risk Assessment and Business
Performance
Results indicate that there is no statistically significant relationship between Risk
assessment and Business Performance at 0.05 significant levels (p>0.05)

Table 4.4 Chi-Square Tests-Risk Assessment Vs Organization Performance

Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .079a 1 .778

Continuity .000 1 1.000

Correctionb
Likelihood Ratio .080 1 .777

a. 2 cells (50.0%) have expected count less than 5. The minimum expected count is 3.36.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 04).
4.3.5 Relationship between Risk Response and Business Performance
H0: There is no significant relationship between Risk Response and Business
Performance
H1: There is a significant relationship between Risk Response and Business
Performance
Findings indicate that there is no statistically significant relationship between Risk
Response and Business Performance at 0.05 significant levels (P>0.05)

Table 4.5 Chi-Square Tests-Risk Assessment Vs Organization Performance

Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .618a 1 .432

Continuity .230 1 .632

Correctionb
Likelihood Ratio .615 1 .433

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 6.72.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 05).
4.3.6 Relationship between Control Activities and Business Performance
H0: There is no significant relationship between Control Activities and Business
Performance
H1: There is significant Relationship between Control activities and Business
Performance
Findings indicate that there is no statistically significant relationship between Control
activities and Business Performance at 0.05 significant levels.

Table 4.6 Chi-Square Tests-Control Activities Vs Organization Performance

Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .090a 1 .764

Continuity .000 1 1.000

Correctionb
Likelihood Ratio .091 1 .763
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 5.46.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 06).
4.3.7 Relationship between Information and Communication and Business
Performance
H0: There is no significant Relationship between Information and communication and
Business Performance
H1: There is a significant Relationship between Information and communication and
Business Performance
Results indicate that there is no statistically significant relationship between
Information and Communication and Business Performance at 0.05 significant levels.

Table 4.3 Chi-Square Tests-Information and Communication Vs Organization

Performance
Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .002a 1 .963

Continuity .000 1 1.000

Correctionb
Likelihood Ratio .002 1 .963

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 7.98.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 07).
4.3.8. Relationship between Monitoring and Business Performance
H0: There is no significant relationship between Monitoring and Business
Performance
H1: There is a significant Relationship between Monitoring and Business
Performance
Findings of the research indicate that there is no statistically significant relationship
between Control activities and Business Performance at 0.05 significant level
(P>0.05)

Table 4.8 Chi-Square Tests-Monitoring Vs Organization Performance

Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .035a 1 .851

Continuity .000 1 1.000

Correctionb
Likelihood Ratio .035 1 .851

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 7.98.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 08).
4.3.9. Relationship between Overall ERM and Business Performance
H0: There is no significant Association between Overall and Business Performance
H1: There is a significant Association between Overall and Business Performance
Findings indicate that there is no statistically significant relationship between Overall
ERM and Business Performance of SMEs at 0.05 significant level (p>0.05)
Table 4.3 Chi-Square Tests-Event Identification Vs Organization Performance
Value Df Asymp.Sig. (2-sided)

Pearson Chi-Square .487a 1 .485

Continuity .131 1 .717

Correctionb
Likelihood Ratio .496 1 .481

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 5.04.
b. Computed only for a 2x2 table
Source: Primary Data

(Appendix 09).
Further it can be conclude that ERM dimensions are not practicing in the context of
SMEs in CDSL.
Findings imply further that some reasons for not implementation of ERM practices in
the context of SMEs in CDSL and those findings describe as follows;

4.4 Restrictions to implementation of ERM in the context of SMEs in CDSL

In this research researcher found that various reasons to restrict to
implementation of ERM in the context of SMEs in CDSL. SMEs are running their
businesses without considering their risk management activities in order to achieve
their short term goals and objectives. Followings are the major reasons that researcher
found to restrict to implementation of ERM in the context of SMEs in CDSL.

4.4.1Lack of awareness
Some of SME owner manager’s have not any perception with regards to even
risk management practices. Lack of knowledge about Risk management badly affect
to their business performances and survival. Lack of awareness about ERM practices
is one of the key causes that SMEs suffered.

4.4.2. Lack of Vision, Strategies, and Plans

Most of the SMEs have not proper defined vision, mission, strategies and
plans for their businesses. They have only short term objectives in order to carry out
their day to day businesses. Even though objective setting is one of the key
dimensions in ERM, most of the SMEs are not practicing it in proper manner due to
their unawareness.
4.4.3. Poor Management Teams
Majority of the SMEs have not knowledgeable and educated management
team for manage their business activities. Owner manager is doing majority of the
work load in business and he or she have not proper management skills in all rounder.
Poor management lead to enhance business risks with in the entity and it will badly
affect to survival of the SMEs.

4.4.4. Lack of Real and Effective Structure

SMEs have not effective organizational Structure in their business context.
Most of the SMEs are doing their businesses in own way without proper structure.
4.4.5. Lack of Business and Technical Infrastructure
Lack of Business and technical Infrastructure is one of the key restrictions that
SMEs faced. They have only limited financial and physical resources to carry out
their business and it become major cause for develop their businesses. It badly affects
to control activities in the SMEs and ultimately it show that poor ERM practices.

4.4.6. Lack of Risk Management Initiations

Due to Lack of Risk Management techniques and Knowledge majority of the
SMEs cannot manage their risks in effectively. Some Owner managers have not any
knowledge about ERM or SMEs.

4.4.7. Inherent Limitations

There are inherent limitations in SMEs such as poor management skills,
technical skills; financial problems badly affect to their risk management techniques.
Most of the SMEs have negative perception on Risk management. They are thinking
that it is not essential to their businesses.

4.4.8. Poor Accounting and Book-Keeping Practices

Poor accounting and Book-Keeping practices is one of the major factors that
affect to badly for implementation of SMEs. Most of the SMEs are reporting their
financial transactions and events in poor manner and due to those practices SMEs are
facing some difficulties and ultimately it will badly affect to ERM practices.

4.4.9. Management Inability

Lack of management’s technical and conceptual inabilities are directly affect
risk management dimensions in ERM and it will affect to business performances as
well. This factor is one key factor that affect to impracticability of ERM in SMEs.

4.4.10. Poor communication and monitoring activities

Most of the SMEs are not maintain proper communication network and
monitoring activities in order to implement ERM in the context of SMEs. Majority of
SMEs have not better understood about communication, monitoring and business
review activities.
4.4.11. Financial Problems:
Some of owner managers are thinking that implementation of Risk
Management practices is high costly process and due to that it is not need to them.
This factor also affect to Poor ERM practices in SMEs.

4.4.12. Improper and Poor Planning

Improper and poor planning for future event identification, Risk assessment
and Risk Response are mainly affecting to SMEs in badly their Risk Management
activities and ultimately it will affect to poor performance in the business.

4.5 Chapter summary

This chapter includes both quantitative and qualitative analysis and
interpretations. Descriptive statistics were used to mean and standard deviation and
Pearson’s chi-square analysis used to check whether relationship among ERM
dimensions and Business performance and it show that there is no relationship
between Overall ERM and Business performance

CHAPTER FIVE
CONCLUSIONS, SUGGESTIONS AND POLICY IMPLICATIONS

5.1 Introduction
This chapter summarizes the research findings presented in Chapter Four and
their theoretical and managerial implications. Researcher is going to conclude all
findings and Discussions in this chapter. The research limitations and directions for
future researches are also discussed.

5.2 Conclusion
Both quantitative and qualitative analysis of this study showed that there is not
practice of ERM in the context of SMEs in CDSL. ERM dimensions such as Internal
Environment, Objective Setting, Event Identification, Risk assessment, Risk
Response, Control Activities, Information and Communication and Monitoring are
not practicing at acceptable level due to different types of causes.

According to chi-square analysis, there is no statistically significant

relationship between all ERM dimensions and business performance in the context of
SMEs in CDSL. Further there is no statistically significant relationship between
overall ERM and Business performance. It clearly concludes that SMEs in CDSL are
not practicing ERM in properly in their business context.
Generally, SMEs in CDSL practicing some kinds of risk management
practices at low level but not in well established. The most important factor that
determines degree of risk management practices in SMEs depending on owner
manager knowledge and skills towards the risk management. Those owner managers
have low level adequate technical skills, industry experiences, and risk management
skills in order to identify their existing and potential risks. The majority of SMEs in
CDSL running their businesses with a very low level of skills and expertise especially
managerial and technical know-how take a while to acquire proficiency and adapt to
the firm’s environment. This may also cause to the indirect impact on ERM of SMEs.
Most of the SMEs in CDSL were lacking awareness of ERM practices, benefits of
practicing ERM, potentials and opportunities. However SMEs are practicing some
kinds of risk management practices with available resources at lower level and even
though those practices not integrated and acceptable level.

5.4 Suggestions
In order to improve the degree of ERM, SMEs in CDSL need develop their
skills and capabilities, as well as internal and external networks. This study point out
that there is no relationship ERM dimensions and business performance, it imply that
SMEs should have to concentrate about ERM frame work and in order to achive their
goals and objectives. This study point out importance of SMEs to improve ERM
practices in order to improve business performance. Further according to ERM
framework SMEs have to improve practices in dimensions such as internal
Environment, objective setting, Event Identification, Risk assessment, Risk Response,
Control activities, information and communication and Monitoring.
5.4 implications
Findings of this study have some implications for theory and practice
particularly for development of SMEs in CDSL. The theoretical contribution of this
study provides new insights in small business research concerning the Colombo
district of Sri Lanka follow up similar studies , which may provide more reliable data
interpretations in SME development.
Some points highlighted herein were for the government and non government
sectors to focus on promoting the level of ERM by directing research and
development activities, providing financial resources, training package and
consultancy services etc. Also contains some information useful in collaborative work
among government agencies, the chamber of commerce, Industrial Development
Board (IDB), Business Development Services (BDS) to direct more resource and
energy to promote, and encourage Risk Management culture towards enhance ERM
practices of SMEs. Further , the present study may also provide useful information for
SME owner/managers in relation to their individual level of Enterprise Risk
Management as an assessment in developing their skills.

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APPENDIX

QUESTIONNAIRE

I am Fernando H.D.C.P. (UWU/ENM/08/0014) currently reading final year studies for

Bachelor of Business Management in Insurance and Actuary at Uva Wellassa
University of Sri Lanka. In order to partial fulfillment of the requirement of it, I am
conducting a research relating to the impact of Enterprise Risk Management (ERM)
and Organization performance. (In the context selected SMEs in Colombo District).
Thus I seek information relating to your company to conduct said research project.
Since, please be kind enough to give your cooperation to fill this questionnaire based
on your views. Especially I will assure that these information’s are only used for the
research purpose and your response will be kept strictly confidential.
 Name of the entity :
…………………………………………………………………………………
 …………………………………………………………………………………
…………………………
 Address of the business :
…………………………………………………………………………………
……………….
…………………………………………………………………………………
………..………….……………………………………………

Instruction :
Please answer the questions given below. In answering questions, please use the
following response scale and tick () the most appropriate number against each
number.
5 : As excellent
4 : Good
3 : Fair
2 : Poor
1 : Not at all

Effectiveness of ERM framework

Internal Environment
Questionnaire 5 4 3 2 1

1) We have Effective organizational structure for

entity
2) Owner manager’s effectiveness and
competence towards the entity
3) Entity’s owner manager’s philosophy and
operating style

Objective setting
4) Entity is Setting corporate strategy, overall
direction, mission and vision
5) Entity Specify achievable objectives
6) Entity is Developing strategies and setting
policy guidelines
Event identification
7) Entity is Setting Event inventories
8) We keep particular person to identify risks and
opportunities
9) Entity maintain Leading event indicators

Risk assessment
10) Entity is Setting objectives when asses risks
11) We are analyzing related risks
12) We are Managing changes
Risk Response
13) Entity Select the most appropriate response(s) to
risk
14) We have Effectiveness of entity’s risk response
tools
15) Degree of effectiveness of entity’s Risk
assessment

Control Activities
16) Your entity’s Business performance reviews
17) Entity’s Information processing (including
application controls and IT general control)
18) Physical control activities

Information and Communication

19) Pertinent information identified, capture and
communicated in timely manner
20) Access to internal and externally generated
information
21) Entity is Identifying and documenting the
significant processes for key financial statement
areas

Monitoring
22) Entity Assessment of control system’s
performance over time
23) Combination of ongoing and separate evaluation
in your entity
24) Owner Manager’s supervisory activity
25) Entity is conducting Proper Internal audit
activities

26) Yearly Turnover

Year Sales (Rs)

2006
2007
2008
2009
2010

27) Owner manager satisfaction

Very low

Low

Moderate

High

Very high

28) Your view regarding Enterprise Risk Management

Thank you.
 SPSS Output
Appendix 01
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
Organizational
performance * internal 50 100.0% 0 .0% 50 100.0%
environment

ORGANIZATIONAL PERFORMANCE * EVENT IDENTIFICATION

Crosstabulation

Internal environment
low high Total
Organizational Low Count 5 24 29
performance Expected Count 4.6 24.4 29.0
High Count 3 18 21
Expected Count 3.4 17.6 21.0
Total Count 8 42 50
Expected Count 8.0 42.0 50.0
 Chi-Square Tests
Asymp. Sig. Exact Sig. Exact Sig. (1-
Value Df (2-sided) (2-sided) sided)
a
Pearson Chi-Square .079 1 .778
Continuity Correctionb .000 1 1.000
Likelihood Ratio .080 1 .777
Fisher's Exact Test 1.000 .549
Linear-by-Linear
.078 1 .781
Association
N of Valid Casesb 50

a. 2 cells (50.0%) have expected count less than 5. The minimum expected count is
3.36.
b. Computed only for a 2x2 table
Appendix 02

Case Processing Summary

Cases
Valid Missing Total
N Percent N Percent N Percent
OBJECTIVE
SETTING *
50 100.0% 0 .0% 50 100.0%
ORGANIZATIONAL
PERFORMANCE
 ORGANIZATIONAL PERFORMANCE * OBJECTIVE SETTING
Cross tabulation
ORGANIZATIONALPERF
ORMANCE
1 HIGH Total
OBJECTIVE LOW Count 11 8 19
SETTING Expected
11.0 8.0 19.0
Count
2 Count 18 13 31
Expected
18.0 13.0 31.0
Count
Total Count 29 21 50
Expected
29.0 21.0 50.0
Count

Chi-Square Tests
Asymp. Sig. Exact Sig. Exact Sig.
Value Df (2-sided) (2-sided) (1-sided)
a
Pearson Chi-Square .000 1 .991
Continuity
.000 1 1.000
Correctionb
Likelihood Ratio .000 1 .991
Fisher's Exact Test 1.000 .610
Linear-by-Linear
.000 1 .991
Association
N of Valid Casesb 50
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is
7.98.
b.Computed only for a 2x2table

Appendix 03
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
ORGANIZATIONALP
ERFORMANCE *
51 100.0% 0 .0% 51 100.0%
EVENT
IDENTIFICATION

ORGANIZATIONAL PERFORMANCE * EVENT IDENTIFICATION

Crosstabulation
EVENTIDENTIFICAT
ION
LOW 2 Total
ORGANIZATIONAL 1 Count 20 9 29
PERFORMANCE Expected Count 19.3 9.7 29.0
HIGH Count 14 8 22
Expected Count 14.7 7.3 22.0
Total Count 34 17 51
Expected Count 34.0 17.0 51.0
 Chi-Square Tests
Asymp. Sig. Exact Sig. Exact Sig. (1-
Value Df (2-sided) (2-sided) sided)
a
Pearson Chi-Square .160 1 .689
Continuity Correctionb .010 1 .920
Likelihood Ratio .159 1 .690
Fisher's Exact Test .769 .458
Linear-by-Linear
.157 1 .692
Association
N of Valid Casesb 51
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is
7.33.
b. Computed only for a 2x2
table

Appendix 04

Case Processing Summary

Cases
Valid Missing Total
N Percent N Percent N Percent
ORGANIZAATIONA
L PERFORMANCE * 50 100.0% 0 .0% 50 100.0%
RISK ASSESMENT
 ORGANIZATIONAL PERFORMANCE * RISK ASSESMENT
Cross tabulation

RISKASSESMENT
LOW HIGH Total
ORGANIZATIONAL 1 Count 5 24 29
PERFORMANCE Expected Count 4.6 24.4 29.0
HIGH Count 3 18 21
Expected Count 3.4 17.6 21.0
Total Count 8 42 50
Expected Count 8.0 42.0 50.0

Chi-Square Tests
Asymp. Sig. Exact Sig. Exact Sig.
Value Df (2-sided) (2-sided) (1-sided)
Pearson Chi-Square .079a 1 .778
Continuity
.000 1 1.000
Correctionb
Likelihood Ratio .080 1 .777
Fisher's Exact Test 1.000 .549
Linear-by-Linear
.078 1 .781
Association
N of Valid Casesb 50
a. 2 cells (50.0%) have expected count less than 5. The minimum expected count is
3.36.
b. Computed only for a 2x2
table

Appendix 05
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
ORGANIZATIONAL
PERFORMANCE * 50 100.0% 0 .0% 50 100.0%
RISK RESPONSE

ORGANIZATIONAL PERFORMANCE * RISK RESPONSE

Cross tabulation
RISK RESPONSE
LOW 2 Total
ORGANIZATIONAL 1 Count 8 21 29
PERFORMANCE Expected Count 9.3 19.7 29.0
HIGH Count 8 13 21
Expected Count 6.7 14.3 21.0
Total Count 16 34 50
Expected Count 16.0 34.0 50.0
 Chi-Square Tests

Asymp. Sig. Exact Sig. Exact Sig. (1-

Value df (2-sided) (2-sided) sided)
Pearson Chi-Square .618a 1 .432
Continuity Correctionb .230 1 .632
Likelihood Ratio .615 1 .433
Fisher's Exact Test .543 .315
Linear-by-Linear
Association .606 1 .436

N of Valid Casesb 50
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is
6.72.
b. Computed only for a 2x2
table

Appendix 06
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
ORGANIZATIONAL
PERFORMANCE *
50 100.0% 0 .0% 50 100.0%
CONTROL
ACTIVITIES
 ORGANIZATIONAL PERFORMANCE * CONTROL ACTIVITIES
Cross tabulation
CONTROL
ACTIVITIES
LOW 2 Total
ORGANIZATIONAL 1 Count 8 21 29
PERFORMANCE Expected Count 7.5 21.5 29.0
HIGH Count 5 16 21
Expected Count 5.5 15.5 21.0
Total Count 13 37 50
Expected Count 13.0 37.0 50.0

Chi-Square Tests
Asymp. Sig. Exact Sig. Exact Sig. (1-
Value df (2-sided) (2-sided) sided)
a
Pearson Chi-Square .090 1 .764
Continuity Correctionb .000 1 1.000
Likelihood Ratio .091 1 .763
Fisher's Exact Test 1.000 .514
Linear-by-Linear
.088 1 .766
Association
N of Valid Casesb 50
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is
5.46.
b. Computed only for a 2x2
table

Appendix 07
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
ORGANIZATIONAL
PERFORMANCE *
50 100.0% 0 .0% 50 100.0%
INFORMATION AND
COMMUNICATION

ORGANIZATIONAL PERFORMANCE * INFORMATION AND

COMMUNICATION
Cross tabulation
INFORMATION AND
COMMUNICATION
LOW 2 Total
ORGANIZATIONAL 1 Count 14 15 29
PERFORMANCE Expected
13.9 15.1 29.0
Count
HIGH Count 10 11 21
Expected
10.1 10.9 21.0
Count
Total Count 24 26 50
Expected
24.0 26.0 50.0
Count
 Chi-Square Tests
Asymp. Sig. Exact Sig. Exact Sig. (1-
Value df (2-sided) (2-sided) sided)
a
Pearson Chi-Square .002 1 .963
Continuity Correctionb .000 1 1.000
Likelihood Ratio .002 1 .963
Fisher's Exact Test 1.000 .595
Linear-by-Linear
.002 1 .964
Association
N of Valid Casesb 50
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is
7.98.
b. Computed only for a 2x2
table

Appendix 08
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
ORGANIZATIONAL
PERFORMANCE * 50 100.0% 0 .0% 50 100.0%
MONITORING
 ORGANIZATIONAL PERFORMANCE * MONITORING
Crosstabulation

MONITORING
LOW 2 Total
ORGANIZATIONAL 1 Count 20 9 29
PERFORMANCE Expected Count 20.3 8.7 29.0
HIGH Count 15 6 21
Expected Count 14.7 6.3 21.0
Total Count 35 15 50
Expected Count 35.0 15.0 50.0
 Chi-Square Tests
Asymp. Sig. Exact Sig. (2- Exact Sig. (1-
Value df (2-sided) sided) sided)
a
Pearson Chi-Square .035 1 .851
Continuity Correctionb .000 1 1.000
Likelihood Ratio .035 1 .851
Fisher's Exact Test 1.000 .552
Linear-by-Linear
.034 1 .853
Association
N of Valid Casesb 50
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 6.30.
b. Computed only for a 2x2 table

Appendix 09
Case Processing Summary
Cases
Valid Missing Total
N Chi-Square
Percent Tests
N Percent N Percent
ORGANIZATIONAL 50 100.0% 0 Exact
Asymp. Sig. .0%Sig. 50 100.0%
Exact Sig.
PERFORMANCE * Value df (2-sided) (2-sided) (1-sided)
OVERALL
Pearson ERM
Chi-Square .487 a
1 .485
Continuity
.131 1 .717
Correctionb
Likelihood Ratio .496 1 .481
Fisher's Exact Test .526 .362
Linear-by-Linear
.477 1 .490
Association
N of Valid Casesb 50
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is
5.04.
b. Computed only for a 2x2
table