Enterprise risk management in small and medium family enterprises: the role of family involvement and CEO tenure

Taking the right amount of risk is essential for successful business. As a response to the importance of risk management, the effectiveness and implementation of enterprise risk management (ERM) systems are recently discussed in literature. However, smaller firm entrepreneurs often deal with this challenge in practice in a more informal way. Most of these small and medium-sized enterprises (SME) are family firms, where family dynamics further influence their risk behaviour. Addressing the missing implementation of ERM in Small and Medium Family Enterprises (SMFE), we first analyse how ERM influences the performance of SMFE. In a second step, we investigate the impact of CEO tenure and family involvement as moderators on the ERM - performance relationship. Regression analysis on a sample of 116 Austrian SMFE shows that ERM implementation does not directly influence financial performance. CEO tenure and family involvement, however, both show significant moderating effects on the ERM - performance relationship. Adding to current literature on the topic, this study reveals that ERM performance is positively moderated by CEO tenure and negatively by family involvement.