The integration between enterprise risk management and performance management system: managerial analysis and conceptual model to support strategic decision-making process

Abstract The integration between Enterprise Risk Management (ERM) and Performance Management System (PMS) has become a crucial process for managing environmental complexity in companies. In this context, in order to contribute to the research field, this paper follows two purposes: (1) to identify the most relevant risk dimensions, and connected risk drivers, perceived in managerial practices; and (2) to provide a suitable way to integrate ERM and PMS in supporting the strategic decision-making process. Based on semi-structured interviews with a total of 75 senior and middle managers from 25 different Italian companies, the authors developed a conceptual model to support the corporate transition to integrate ERM and PMS processes, built on a specific set of Key Risk Indicators (KRIs) that can enable them to achieve economically and environmentally sound performance.


Introduction
Risk management (RM) has been deeply explored by an increasing number of scholars involved in different research areas and has many implications for the real world.Nowadays, to achieve a long-term competitive advantage, companies must be able to adapt to the dynamics of a constantly evolving environment (Ojiako et al. 2015;Hristov et al. 2021).The search for new approaches to performance improvement based on corporate risk analysis is continually challenging existing organisational dynamics and creates new concepts of business performance (Scapens 2008;Andersen, Busi, and Onsøyen 2014).
The awareness and importance of considering RM, as one crucial element of the value creation process, in the corporate strategy is well documented by researchers and company leaders, who are increasingly adopting Enterprise Risk Management (ERM) practices and initiatives in their business plans and strategies (Crovini, Ossola, and Britzelmaier 2021).In this context, COSO's (2017) framework suggests integrating ERM with corporate strategy to achieve several benefits for a company, in terms of increasing the range of opportunity, positive outcomes, and advantage while reducing negative surprises and performance variability, and improving resource deployment.In this context, the integration between ERM and Performance Management System (PMS) could help companies to obtain relevant advantages in terms of companies' performance outcomes (Lam 2014;Hall, Mikes, and Millo 2015;Taylor and Ahmed-Kristensen 2018).
However, despite the significant and growing literature recognising the potential of the ERM at a strategic level, its effective integration with the PMS remains suboptimal (Palermo, Power, and Ashby 2017).By analysing management accounting literature on the research field, we noted an absence of a clear picture and a lack of managerial evidence on what are the main risk dimensions, and connected measures, involved in the strategic decisions of organisations (Viscelli, Hermanson, and Beasley 2017;Raffoni et al. 2018).In addition, we found a lack of practical solutions and strategic tools that support managers in implementing an integrated approach.Limited research has focussed on practical approaches to adopting a set of risk indicators to support an integrated view (Cheng, Humphreys, and Zhang 2018).To place the ERM in the context of the PMS, and to identify related tools for integrating the risk dimensions into these systems, continues to challenge organisations.
Given these premises, in order to improve the existing knowledge on the research field, this paper follows two research questions: 1. (Rq1) What do managers perceive as the most relevant risk dimensions, and connected risk drivers, that affect companies' performance?2. (Rq2) How can ERM and PMS be integrated to support the strategic decision-making process?
To answer these research questions, we conducted semistructured interviews with a total of 75 Italian managers.Results have highlighted interesting issues for the scientific community and practice, opening a future path of research.In particular, with regard the first research question (Rq1), we identified five risk dimensions (financial, operational, stakeholders' engagement, learning and growth, and cultural), considered relevant by managers, which influence the companies' performance and thus deserving to be integrated at a strategic level.For each of these, and in accordance with the managers' support, we generated a specific set of Key Risk Indicators (KRIs) that aimed to explore the level of corporate risk perception in a company.
With regard to the second research question (Rq2), we structured a five-dimensional conceptual model based on an integration between ERM and PMS, in order to implement and monitor a novel integrated risk-oriented approach.We built a specific index of Corporate Risk Perception (CRP) that aims to implement, monitor and manage corporate risk.
Therefore, the novelty and relevance of our paper for practice and scholars is perceived through several aspects.Firstly, our research adds to the existing literature because we specifically investigate, within managerial practice, the value of the adoption of an integrated approach oriented to link ERM and PMS to companies' performance, as suggested by the COSO (2017) framework; an approach that has not been adequately explored to date.We provide scholars and managers with a clear view of the main corporate risk dimensions and connected risk drivers that are useful to support the integration process in practice.In addition, thanks to the information gained by management experience, we developed a structured set of KRIs as a tool to support planning and control of the strategy.Finally, a conceptual model is designed to provide managers with conceptual pointers to guide the implementation of their own corporate systems for monitoring and implementing risk-oriented strategy.The conceptual model suggested can even be considered to pave the way for future research directions (especially statistical evaluations of indicators proposed in disruptive occasions) and managerial practices (with particular interests on case studies testing real effectiveness of the structure proposed).
In the next Section, we summarise the literature related to integration between ERM and PMS.We then describe our research method and discuss the research results.We finally draw on the main conclusions from this work to propose potential avenues for the research agenda within this field.

Key concepts used in the paper
The first key issue addressed in this paper is ERM, defined by the COSO framework (2017) as 'a process, affected by an entity's board of directors, management, and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity and manage to maintain risk within the risk appetite, to provide reasonable assurance regarding the achievement of entity objectives'.In this context, ERM is needed to assemble an organic system based on a logical and organised methodology (Culasso et al. 2016; Cheng, Humphreys, and Zhang 2018) that, through different steps, allows the identification, analysis, evaluation, elimination, and monitoring of the risks associated with any activity or process; the reason being organisations may be able to minimise losses and eventually maximise opportunities (Ittner and Larcker 2009).ERM has been deeply investigated by an increasing number of scholars involved in different research management areas and has many implications for organisations (Woods, Dowd, and Humphrey 2008).Adopting ERM helps to create a strong foundation and generates confidence in all stakeholders, which requires greater scrutiny than ever before about how risk is managed in the organisation (Akwei and Zhang 2018).
Addressing the second key issue of our paper, the authors focus upon integration of ERM and PMS, the latter a widely discussed topic in the debate on corporate growth.PMS can be defined as 'a system based on several correlated processes that support managers in decision making, for value creation in a holistic manner, by identifying several steps and processes to include in the companies' strategies' (Hristov et al. 2021).It includes a set of activities, approaches, and tools that companies need to achieve their strategic objectives effectively and efficiently (Armstrong and Baron 2005;Ferreira and Otley 2009).More specifically, it is a process of identification, measurement, and development of group and individual performance, so that they are always aligned with the strategic objectives of the business.It is a process subject to continuous revision; the methods of achieving company objectives are not in fact fixed and unchangeable over time but are based on the possibilities offered by the historical, infrastructural, cultural, and organisational conditions of the environment.In implementing a PMS, the starting point is the development of a 'strategic plan' that defines the roles, competences, and strategic goals of the company.Accordingly, once the strategic plan is computed, the following step is the diffusion and implementation of the strategies defined.This step is crucial as it connects planning with the strategy execution (Aguinis 2012), and a major role is here played by Key Performance Indicators (KPIs), which 'measure the business health of the enterprise and ensure that all individuals at all levels are marching in step to the same goals and strategies' (Bauer 2004).Due to PMS systemic view on the corporate activities and suitable design for specific corporates' adaptations, especially in its initial phase of strategic planning, this approach is particularly proficient in identifying, analysing, and addressing differentiated corporate risks.

The integration between ERM and PMS
In this Section, with the aim of proposing a valuable integrated approach oriented to link ERM and PMS, we examined the relevant literature related to the integration process between the ERM and PMS as key concepts used in this paper (Table 1).COSO's (2017) framework suggests how integrating ERM practices throughout an entity helps to accelerate growth and enhance performance.In fact, the integration between ERM and PMS leads to generate a positive effect, not only inside the firm, increasing working quality conditions, but also produces an external effect on image and reputation and, therefore, strongly impacts on the stakeholders' view (Ritchie and Brindley 2007;Mikes 2009;Harrison and Wicks 2013), beyond financial performance and short-term consideration (Sax and Torp 2015;Florio and Leoni 2017;Palermo, Power, and Ashby 2017).More specifically, Akwei and Zhang (2018) suggested how ERM and PMS are integrated as essential systems in the successful development a company's performance.Accordingly, it leads to effective and efficient management of the organisation (Fraser and Simkins 2016;Khan, Hussain, and Mehmood 2016).To this end, the management decision process could be supported by a strategic tool that provides considerable assistance in developing an improved tendency towards a raised awareness concerning uncertainty and performance (Martinez, Pavlov, and Bourne 2010).The best strategy must be developed to have the desired performance in order to fulfil the targeted objectives in relation to their connected risks.This is the logical step to formulate a complex plan.Meanwhile, effective and efficient measurements are essential to assess the status of these steps.
Although several studies indicate there is a direct or indirect link of an integrated approach to the company's performance (Keil, Rai, and Liu 2013), there is a lack of extant literature that explains how this relationship is developed, implemented, and measured in organisations (Tiwana and Keil 2009;Keil, Rai, and Liu 2013).Therefore, there is a need for research into the management accounting field to provide a clear view and suitable way on 'how' and 'why' to integrate the two approaches analysed (Smith, Hills, and Cleland 1996;Woods, Dowd, and Humphrey 2008;Bunduchi 2013).
With regard to the approaches used and studied in the existing literature, a major stream of research suggests adapting the BSC system to identify, assess, and manage risks (Frigo 2009;Sakrabani and Teoh 2020).The Balanced Scorecard (BSC), as a strategic management tool aimed at clarifying strategy and translating it into action, is considered a flexible approach that can be adapted to integrate RM in strategy execution (Ittner, Larcker, and Meyer 2003;Kaplan 2009;Cheng, Humphreys, and Zhang 2018).For example, the case of the Bank of Tokyo-Mitsubishi shows that the BSC and ERM systems are widely combinable (Nagumo 2005).In these cases, organisations often integrate KRIs, namely 'a set of variables providing an estimate for the likelihood and the severity of operational risk', to empirically foresee and face specific risky events (Scandizzo 2005) but, since companies face risks that continuously change, the KRI system also needs to be changed.Ho, Lu, and Lucianetti (2021); Palermo, Power, and Ashby (2017).
Integrating ERM and PMS generates a positive effect on the image and reputation of an organisation and therefore, strongly impacts on the stakeholders' view.Harrison and Wicks (2013); Mikes (2009); Ritchie and Brindley (2007).
An integrated approach considering both the PMS and the risk component enables improving the performance of the social technology strategy within a company.Lenk et al. (2019); Florio and Leoni (2017); Sax and Torp (2015).
Integrating PMS and ERM would result in better process outputs (less deviation from objectives, better process efficiency, and effectiveness and enhanced customer satisfaction).Samani et al. (2019); Khan, Hussain, and Mehmood (2016).
Integrating ERM and PMS enables improving projects' effectiveness.
An integrated approach enables managers to better understand various components of their strategy.
An integrated approach enables prevention of deviations from the strategic goals and positively impacts on performance.
Integrating ERM practices throughout an entity helps to accelerate growth and enhance performance.It also contains principles that can be applied-from strategic decision making through to performance.Considering the corporate risk dimensions, several authors in recent years focussed on their integration as moderators that enhance the effect of a specific factor on performance, such as stakeholders' engagement, operational dimension, innovation process, and financial perspective.In particular, Pagach and Warr (2011) suggest that one of the primary goals of an integrated risk approach is to maximise stakeholders' engagement at a strategic level.This adoption has become a key resource in the design of an integrated system that is influenced by the desire to develop systematic approaches to lead to an accurate and integrated system (Lenk et al. 2019;Ho, Lu, and Lucianetti 2021).Moreover, Gordon, Loeb, and Tseng (2009) emphasise the role of the operational dimension related to the ERM strategy development at a strategic level.This process requires a detailed and specific analysis of the possible risks that can occur, associated with the formulation and monitoring of the corporate objectives.All types of identified and priority risks associated with this dimension need to be reduced to minimise their impact on performance.
In the same way, the innovation process in the company aimed at review, revision, and development could be compromised by several risks (Bordeleau, Mosconi, and de Santa-Eulalia 2020; Sakrabani and Teoh 2020).In addition, Smithson and Simkins (2005) have provided a review designed to understand the relationship existing between the use of ERM and PMS in the financial value of the firm.The authors found that, potentially, the integrated approach leads companies to improve their financial performance, which is considered the main outcome impacting the strategic decision-making process (Tsai, Chou, and Hsu 2009;Bourne and Mura 2018).
Therefore, from the theoretical background outlined, it seems that a need for further exploration of the risk dimensions and connected risk drivers, used in managerial practice is strongly required.This prompted our first research question, and is likely the most complex and critical, particularly given the impossibility of providing a unique and standard solution for organisations of different types, sizes, sectors, as well as many other factors.Accordingly, supported by the managerial experiences, we attempt to provide the clearest picture possible of the main risk dimensions and connected risk drivers (Rq1), to be considered within the strategic decision-making process.
However, what clearly also emerges is a lack of a specific strategic tool, either theoretically discussed or practically implemented, aimed at integrating the ERM and PMS.It seems there is an opportunity to develop conceptual models, for managerial use, based on both literature and managers' evaluation to guide such integration (Rq2).

Research design overview
The authors focussed on a semi-structured interview approach to explore on the field the factors affecting the integration between ERM and PMS.This methodological approach in management research is useful in an exploratory context to develop new research propositions (Childe 2011), allowing a full understanding of the context when answering 'how' questions (Schneider and Vieira 2010), in order to adopt both a qualitative perspective and an interpretativecompany perspective.This method has been widely used in the literature to provide an action research context in companies' practices, allowing a practical point of view to support the decision-making process.We developed a research design protocol, see Table 2, to ensure the research design was clear, complete and feasible.The protocol helps to make sure the same methodology is applied for all cases, ensuring better reliability (Gibbert, Ruigrok, and Wicki 2008).
Data was mainly gathered in four different ways: (1) literature review analysis, (2) survey with professionals in a preliminary step, (3) semi-structured interviews with managers; a common method that field researchers (Evans et al. 2015;Dai, Free, and Gendron 2019) use to interact with and collect data from organisational participants in the field, and (4) internal report analysis (production report, supplier schedule, stakeholders list, sustainability report, financial reporting, and ISO certification).
In addition, different analysis-synthesis approaches (descriptive statistics analysis and qualitative Thematic Analysis (TA)) were used to identify the managerial trends and critical issues in integration ERM and PMS, as explained below.

Sample selection
With regard to the sample selection, thanks to the AIDA 1 database and personal relationships, derived mainly from preliminary investigations related to past research in the same field, a web-based questionnaire was emailed to 198 managers who were initially contacted through their email address.We focussed on large Italian companies from three main sectors (manufacturing, service, and agriculture).This choice was led by the fact that these sectors are the most relevant markets in Italy, considering the GDP (Gross Domestic Product).In addition, the criteria used for this selection were only those companies with more than 100 employees, because they were expected to have a more sophisticated and structured management control systems (Lisi 2018;Hristov, Appolloni, and Chirico 2022), and the availability of a web page or an email address.
As shown in Figure 1, a total of 74 questionnaires were completed with a 37% response rate.Of these returned questionnaires, 28 were discarded because the respondents declared that the topics under investigation did not apply to their company.The final total consisted of 46 managers who have had experience in managing, using or implementing management control systems.The subsequent analysis, therefore, focussed on the 46 completed questionnaires in order to identify the managers to be included in the final sample for further analysis.Accordingly, it was decided to take into consideration only managers with a good level of experience related to the issue analysed (more than 5 years) and with a high organisational profile (senior and middle manager).As a result of this approach, a total of 32 managers were identified that jointly correspond to the applied filters, from which 25 confirmed their willingness to undergo a telematic interview via Skype or telephone and to share their company's information with us.Thanks to this process, it was possible to establish direct contact with interviewees and become familiar with their work ecosystems.Subsequently, in order to reduce potentiality of individual biases in answering and ensure representation of managerial cross functions, we asked managers to share the contacts details of two of their colleagues.Accordingly, we focussed on a final sample of 75 managers from 25 organisations.

Data collection and ethics
Once the sample had been identified, some preliminary activities were carried out in order to prepare the managers for the interview.First, they were informed via e-mail of the main purposes for this type of research.In general, the managers asked for more specific information, and this was provided by phone or Skype.This process made it possible to establish easy contact with the interviewees and become familiar with their work environments.Second, theoretical definitions presented in the interview questionnaire were shared with managers to increase comprehension of the topic and increase validity of results interpreted.Therefore 'dimensions of risk' were agreed as clusters of risks divided according to their nature (Hansson 1989); 'risk drivers' were defined as single predictive events associated to related risk dimension and potentially influencing strategic decisions (Bonfim 2009;Liu et al. 2017); 'strategic decisions' were identified as those crucial because signing the course of the firm (Eisenhardt and Zbaracki 1992).
From January 2020 to October 2021, we collected data from a sample of 75 managers experienced in management control through (i) a survey questionnaire for collecting demographic and preliminary data, and (ii) an interview questionnaire for collecting specific information aimed at answering the two research questions.
The survey questionnaire allowed collecting information related to the personal details of the respondents, their companies, and knowledge of how the ERM and PMS were structured.In particular, the survey questionnaire was intended to reveal demographic data of a generic nature on the sample under investigation (age, gender, job position, company tenure, and work experience), and to determine information about the knowledge on the strategic issues and connected risks, thus contextualising the research.Table 3 summarises the information gathered from the 75 selected managers by means of the survey questionnaire.
The interview questionnaire followed a form based on a semi-structured type of interview (Ferreira and Otley 2009).This led to a systematic logic for presenting the set of questions (14 for the managers, divided into two segments).With regard to the questionnaire used to interview the managers (supplemental Appendix A), the first segment, designed to generate data and information to answer the first research question (Rq1), presents a specific set of questions on the most significant risk dimensions perceived in the managerial practice and connected risks drivers.The second segment, oriented to support the answer to the second research question (Rq2), aimed to discuss the current approaches, gaps, outcomes and critical issues to provide a suitable way to integrate risk dimensions and connected risk drivers into the strategic decision-making process.
The qualitative data collected, in the form of answers, were classified in the main conceptual areas related to the framework provided (risk dimensions, strategic goals, risk items, and KRIs).The interview process was prepared based on the Ferreira and Otley (2009) framework, which supports our research process in considering and integrating RM in the PMS of the company selected.In addition, analysis of several company reports and documents, observations during site meetings, reviews of public documents, and several briefings by relevant employees enabled the triangulation of data collected.Each interview lasted 77 min on average (ranging from 59 to 95 min.),which were all transcribed and coded for analysis.
Additionally, in order to validate the process (Bortolotti, Boscari, and Danese 2015), after the interview, the interviewees were asked to verify the transcribed interview from the information provided and to verify any inaccuracies.In order to improve internal validity, the data collected from the interviews and the secondary data were subjected to the triangulation process (Eisenhardt and Graebner 2007;Sousa and Voss 2008).This made it possible to reduce the judgments of subjectivity and guarantee the objectivity of the information.Note.We interviewed three managers per company in order to ensure representation of managerial cross functions

Research findings
Basing on the two segments of the interview questionnaire, the authors have divided the research findings into two subsections.The first subsection 'Descriptive analysis of the risk dimensions and risk drivers', based on answers to the first segment of the interview questionnaire, aims to report and discuss the corporate risk dimensions and risk drivers perceived by managers that potentially impact on performance.The second subsection 'Thematic analysis', based on answers to the second segment of the interview questionnaire, exploits TA for identifying and discussing current approaches, gaps, outcomes, and critical issues related to ERM and PMS integration as perceived by managers.

Descriptive analysis of the risk dimensions and risk drivers
In line with our first purpose (Rq1), we asked, in segment 1 of the interview questionnaire, on the risk dimensions and risk drivers as perceived in the organisations.Accordingly, in the first instance, we asked managers to identify the main risk dimensions that should be considered at a strategic level (Figure 2) to reduce their effect on the company's performance.It is important to specify that, in this phase, managers were completely free to provide their answers without considering the number of options (Brinkmann and Kvale 2008).Accordingly, they were given free rein to add specific dimensions that are considered relevant in practice.After the interviews, we read the managers' answers and analysed them by combining similar information in a specific cluster.Therefore, we assessed all the returned interview questionnaires, extracted, classified and counted keywords one by one by question, and presented the main output in statistical charts in Figure 2, which was useful in illustrating the interviewees' opinions.
In the second instance, for each dimension that emerged, we asked the interviewees to provide a maximum of three main risk drivers associated with each of the risk dimensions generated.We have, therefore, identified the five risk drivers with the highest frequency and inserted these within the related dimensions as in Table 4.
In particular, as shown in Figure 2, 72 respondents (96% of the total) have suggested financial risk as the main dimension that affects their decision-making process.This dimension seems to be very relevant in all industries in the sample (Agriculture with 14 of 15 managers, 93% of the responses; Manufacturing with 31 of 33 managers, 94% of the responses; and Services with 27 managers, 100% response rate).Managers evidenced the need to include the financial dimension at an early stage of the strategy implementation by defining the specific goals and KRIs.As can be seen from Table 4, in particular, two risks are considered by nearly all managers interviewed: liquidity risk that does not allow the organisation to sustain unexpected expenses, thus continuously renewing the financial risk (100%), and the credit risk (81%).
The second risk dimension suggested by a large number of the managers (i.e.69) is connected to operational risk.The managers' approach to the operational dimension to reduce internal conflicts and complexity is by addressing strategic misalignments.Meanwhile, unused production capacity (55 of the respondents, 72% of the total), which prevents the firm from completing the whole production cycle, as well as investment return and safety in the workplace, may be defined as a traditional risk, which is still prioritised by individuals (80%) in terms of working climate that allows employees to perform better.Formal attribution of roles and tasks arose as crucial for avoiding internal and organisational conflicts, which could in turn impact on the strategy formulation process and its implementation.In addition, the relevance of the recruiting process, and human resources management in general, appears to play an important part in the development of resources capable of adding value to the company through specific skills, such as flexibility, learning, and motivation.
In considering the third dimension discussed, a total of 52 respondents pointed out the relevant role covered by the stakeholders' perception dimension.This dimension is mainly considered by the managers who work in the manufacturing (73%) and services (77%) industries.The stakeholders' dimension is taken over by interlocutors to improve the business-relation quality.A high level of dependence on key customers can be considered as a value driver of this dimension with a total response rate of 99%.Nonetheless, reputation drop on the financial market is still conceived as a considerable risk among corporate relationships (73%).It means that in order to increase goal achievement, managers need to work on corporate reputation, which is a key element.In addition, reducing this kind of risk allows creating new market opportunities and solid partnerships with financial institutions, clients, suppliers, and public administration.
With regard to the learning and growth risks, this dimension is fundamental to generate strategic learning and provide a global vision of organisational performance, promoting organisational development and innovation.The managers (75%) stated that inadequacies of training programs are the biggest obstacle for company learning and growth.Moreover, 73% of interlocutors perceived intellectual-property-protection as a priority to develop a profitable innovation plan.In general, thanks to sustained innovation processes, being prepared to transform risks into opportunities is the main value driver for this dimension.The implementation of a risk-oriented strategy requires a structured organisational control system with particular regard to aspects such as employment, innovation, and developing internal skills, and provides a way to manage organisational change.
Finally, the last dimension that emerged from the interviews is the cultural risk.A total of 27 managers argued that this dimension directly impacts on the stakeholders' engagement in the business strategy.In order to guarantee a real integration, the cultural dimension needs to be incorporated into the company's behaviour.In fact, many of the managers interviewed have focussed on the need to raise awareness of the subjects involved in the process at an early stage, which allows management of cultural impact.This dimension measures the cultural development in terms of growth, dialogue, and participation for individuals and communities.In particular, one of the senior managers interviewed, responsible for the manufacturing area, said that: 'among critical aspects that in some way discourage the application of the integration between RM and corporate strategy, is the difficulty to realise an integrated business context due to the cultural barriers'.He argued that culture can impact on employees' motivation and on a manager's ability to manage relevant information, rationalise, and exercise discretion in their decision making.Cultural behaviour, related to internal and external companies' actors who are involved in the value creation process, both at business and social levels, remains a hard challenge for managers and scholars.In order to guarantee the integration, a cultural change needs to be incorporated in the company's behaviour.Elements such as motivation, training, and participation in national and international initiatives and conferences could strongly impact on individual culture that can guarantee the full success of sustainable strategies and risk reduction.Moreover, this dimension can be considered as a vehicle to achieve governance and cultural performance by developing an alignment with the corporate strategy, directly impacting on stakeholders' engagement.

Thematic analysis
As introduced in the previous Section, we adopt a Thematic Analysis (TA) approach to analyse current approaches, gaps, outcomes, and critical issues related to the integration between ERM and PMS.This section reports the qualitative information gathered in the second segment of the interview questionnaire that was processed through a TA.Generally, TA helps researchers in unambiguously deploying information gathered by means of humanly guided procedure (Boyatzis 1998).Such methodological approach emerged particularly useful when authors aim to build new formal constructs of a topic qualitatively investigated (Edmondson and McManus 2007), as the case of interviews performed in this paper to build the integration between ERM and PMS.Our protocol is even validated by relevant studies that worked similarly in performing the interviews (see Adler, Mansi, and Pandey 2021).Aiming to have a clear picture of interviews conducted, codes and themes 2 were drawn up by the authors to create a map of the TA performed (Figure 3).
Items are reported in different colours and forms to emphasise their logical consequentiality and experimental relevance.The black circle in the middle of the figure is the core of our qualitative analysis: the integration between ERM and PMS.The grey rectangles represent the themes, inductively generated following same categorisation (current approaches, current gaps, performance outcomes, and main challenges) used in authoritative research (i.e.Hristov, Camilli, and Mechelli 2022), as topics of the questionnaire.On the other hand, red dashed rectangles represent codes, these deductively emerged from the interviews and discussed in the next lines.While generating codes from interviewers, authors achieved data saturation (Guest, Bunce, and Johnson 2006) after 52 interviews, no codes emerged later on.
During interviews, we firstly discussed about the current existing gaps in managerial practices in integrating ERM and PMS with the respondents, as well the main challenges to address in future literature.The managers argued that one of the main critical issues is related to the lack of adequate measures intended to monitor, quantify, and implement strategy oriented to risk integration at a strategic level.Nearly all the respondents (96%) agreed on the absence of specific measures to systematically integrate risk analysis during the PMS's implementation.One of the managers argued that: 'no indicators, as well as formal or informal numerical parameters, were used to face these risk dimensions in an early stage of the strategy formulation' (n4).Nevertheless, a large number of the managers (64%) highlighted a strong dependency from the context in which the integration approach is adopted and promoted, which does not always allow extending the same practices in all kinds of organisations.For example, a recurrent answer as expressed by one manager was: 'A PMS's risk-oriented implementation has to be customised and adapted considering the industry, size, and context in which the company operates' (n23).
Accordingly, the main challenges for future research, and strongly suggested by the respondents (84%), is to focus on a score that can integrate all risk dimensions in a unique measure, which will be useful to provide a clear view of corporate risk perception.In the same way, the managers suggested statistically analysing the correlation between the risk measures and profitability.Moreover, they pointed out the need to analyse the risk dimensions in a crisis context.
Moving to the performance perceived by the integration process, by analysing the results of the interview questionnaire, it is possible to say that all of the respondents (100%) believe that an increase in the overall performance of a company after the integration process is possible.In fact, one of the respondents highlights that: 'the advantages may not be immediate, but in the medium/long term the integration could improve the PMS efficiency and make it more objective and, therefore, more motivating' (n32).The main performance outcomes are connected to: (1) increased efficiency, in terms of speed, capital allocation, loss minimisation, and cost reduction; (2) enhanced effectiveness; and (3) an easier cognitive process that may lead to a more accurate definition of the strategic plans and objectives.All this is perfectly in line with the above-mentioned idea of some scholars, who individuate the main benefit of the integration as the improved goal setting and efficiency, which leads to the reduction of the risk of cost overrun.Managers affirm that an integrated approach could positively impact on collaborations and new projects, which were often not adequately considered in the existing business models.To this end, efficiency and transparency of information, communication, and the reporting process are relevant.Stakeholders should be able to effectively and efficiently allocate their financial and economic resources in sustainable operations and actions linked to the strategy.This risk category is best managed through active prevention to improve the company's ability to manage or contain the risk events, should they occur.Therefore, the PMS must be designed and implemented in order to stimulate learning at all levels of the organisation, aiming to guide individual behaviours through the definition of risk measures that are constantly connected to the strategic objectives formulated.
Addressing the theme related to the actual integrated approach adopted by the organisations, the managers have discussed the various ways in which their companies have invested in implementing risk practices.The findings suggest that the main initiatives adopted are to implement a KPI system associated to specific KRIs.The managers discussed the relevant role of KPIs aimed at implementing, monitoring, and measuring the risk associated to their strategic processes adopted.In fact, the managers unanimously agreed on one point: 'a set of indicators is a relevant vehicle to integrate risk drivers at a strategic level'.Managers must be able to quickly correct and adapt to changing market conditions.Nevertheless, as explained above, no adequate measures are available in managerial practices, and most of them are focussed on the quantitative aspects, without addressing the The main focus of the analysis Theme (inductively generated basing on literature) Codes (deductively generated from interviews)  qualitative aspects of the performance.Moreover, some of the managers suggest adapting the BSC system to identify, assess, and manage risks, as a tool to define a strategic alignment and cause-effect relationship between the risk dimensions and corporate strategy.Given its characteristics of flexible and intuitive system, it is particularly suitable to practically support managers in their decision-making process.

A conceptual model to integrate ERM and PMS
Based on the results presented in the previous sections, several interesting issues have emerged.The following discussion can be considered as a starting point that needs to be extended by further analysis.Considering the literature contribution and managerial practices, we suggest a conceptual model designed to support a structured and sustainable approach to integrate ERM into the PMS cycle (Rq2).
Accordingly, the conceptual model aims to: (1) provide a clear picture of what we currently know on the potentiality in adopting an integrated approach, and (2) explore a suitable way to integrate ERM and PMS.More specifically, the conceptual model provides a clear view of the main corporate risk dimensions (exploring the existing literature and managerial experience), which suggests integrating them through a definitive and synthetic set of specifically built KRIs aimed to support management decisions in evaluating, monitoring, and implementing an integrated risk-oriented approach.To this end, for each corporate risk dimension, a KRI was generated.
Accordingly, as shown by Figure 4, five KRIs were developed with the aim of implementing, monitoring, and evaluating the risk dimensions of a company at a strategic level.Firstly, a perceived financial risk (FR) index was built, which aims to reduce and control the financial risk.The second KRI generated was the operational risk (OR) index, developed to implement, monitor, and evaluate the operational dimension, and designed to increase organisational efficiency by reducing connected risk.Moving to the stakeholders' dimension, the stakeholder perception (SP) score was built.This indicator is particularly important, because it allows managing organisational risk that is perceived externally, which is intended to reinforce relationships with stakeholders.The fourth KRI generated is the learning and growth risk (LGR), oriented to support organisational development according to a digital and green transition.Finally, the last KRI suggested by the authors is the cultural change risk (CCR) perception, designed to create a radical change and structured foundation allowing the cultural integration between the companies' business units and generating a full understanding of the corporate strategy adopted.All of the KRIs, as specifically discussed with the managers, were designated to implement, monitor, and manage corporate risk at a strategic level.Accordingly, a small step was added in order to facilitate the integration process between ERM and PMS in managerial practices.It is important to state that the KRI system presented below can be considered as a starting phase that requires practical application and additional exploration through further research.
To quantitatively determine the KRI of each risk dimension (FR, OR, SP, LGR, CCR), authors propose to (i) sum estimated probability and impact of each risk driver within the dimension and (ii) calculate the average value of the five risk drivers within the dimension.Therefore, examining all the dimensions, the corporate risk perception (CRP) score is calculated as an average of all KRIs generated, aimed at providing practical and real integration between risk analysis and the business strategy.
The index generated is fundamental to integrate corporate risks and strategy.Specifically, the index allows to implement, monitor, and manage the five corporate risk dimensions at a strategic stage (define and plan) of the PMS's implementation cycle, as shown by Figure 4.
Managers highlighted that companies that are able to integrate risk at a strategic level are also those able to gain benefits from it, improving their competitiveness and, therefore, value creation over time in terms of integration, profitability, image and reputation, and innovation.A company that adopts a strategy oriented to reduce financial risk is perceived as creditable from an economic point of view.Accordingly, it enjoys a good image and reputation, benefitting from positive stakeholder perception.Moreover, a company that has a good reputation creates new opportunities and is able to invest in training and skills' development, assets, and production capacity, improving the organisational process; thus, ensuring efficient use of resources to invest in innovative processes connected to monitoring the organisational climate and employee satisfaction.This organisational and innovation improvement is closely related to the cultural dimension, which directly impacts on organisational change in terms of flexibility, productivity, efficiency, and quality.
Therefore, the PMS must be designed and implemented in order to stimulate learning at all levels of the organisation, aiming to guide individual behaviours through the definition of risk measures that are constantly connected to the strategic objectives formulated.
The specific indicators developed are coherent with those desired by the managers; they are all aimed at complexity reduction, as a driver of the risk-oriented PMS, which is developed through a top-down approach.

Conclusions
The integration of ERM and the PMS, as discussed in this paper, represents a very relevant topic in existing management literature and managerial practices.Professionals must drive the company responsibly and create an appropriate supervisory structure that supports the value creation process.COSO (2017) strongly suggests adopting a riskintegrated approach at a strategic level to consistently provide organisations with the benefits outlined in the framework.As suggested by one senior manager: 'the benefits derived from ERM will far outweigh the investments and provide organisations with confidence in their ability to handle the future'.In this research context, our study can be collocated, developing a roadmap to support corporate transition to integrated ERM and PMS implementation.
The authors' knowledge prior to this research can be summarised as follows: (1) an integration between ERM and PMS potentially impacts positively on the company's performance (mainly in financial terms), (2) management literature has mainly focussed on the operational, financial, stakeholders' engagement, and financial dimensions of the ERM, without providing any practical evidence from managerial practices, and (3) a need for an integrated approach based on the integration between ERM and PMS is strongly required to support the strategic decision-making process.
Accordingly, we proposed two relevant research questions to address the relevant issues outlined.With regard the first (Rq1),  we explored 'what managers perceive as the most relevant risk dimensions, and connected risk drivers, which affect companies' performance'.We found that managers are mainly interested in five corporate risk dimensions (financial, operational, stakeholders' engagement, learning and growth, and cultural), which confirmed four of the dimensions suggested by the literature, but added a cultural dimension, which has not been adequately considered by scholars in management accounting.In addition, for each dimension, we developed the connected risk drivers and a structured set of KRIs, which are useful to manage, implement, and monitor specific risk dimensions.
From this view, we provided a clear view of the main corporate risk dimensions in supporting the integration between ERM and PMS, which may be useful to scholars who further explore our results, and to managers who adopt a set of measures, and which are directly derived from management experience and therefore, strongly correlated to everyday matters.Thus, we position our work with the hope of providing a clear insight into the risk drivers that are aimed to support further development of the results achieved.
With regard the second question (Rq2), we focussed on 'how ERM and PMS can be integrated to support the strategic decision-making process'.According to the results of the literature and managerial analysis, we suggested a conceptual model that aims to develop an integration between ERM and PMS at an early stage of the strategy implementation (define and plan), through the adoption of the CRP index.The conceptual models proposed in management accounting literature had their validity recognised throughout managerial practice but, as reminded by Broadbent and Laughlin (2009), these are not able to foresee the specific composition of any control system.In the same view, the conceptual model proposed in this paper is aimed at providing managers with conceptual milestones for designing their own system until empirical details.
Again, the answer to our second research question contributes to improving the existing knowledge on the research field, supporting academics and practitioners in designing their own structured model oriented to integrate ERM and PMS.
Thus, understanding the value drivers of the integrated approach could help to pinpoint potential, and consequently pave the way for further opportunity to advance these obtained results.In addition, the management focus on the cultural dimension is very interesting, which requires deeper analysis in future research because it represents a key driver of the value creation process.
A cultural change is strongly required to contribute to achieving an integrated view of the company's system.All goals and related measurements require a high-level degree of culture and experience within the organisation.Employee training is, therefore, essential because it increases the degree of knowledge at all levels and, therefore, organisational learning, which is progressively and increasingly proving to be a source of competitive advantage for organisations.Given the significant organisational and cultural implications that emerged from managerial practice, the lack of consideration of these dimensions prevents their full effectiveness.
The research results suggest several paths for future study.Management accounting researchers are presented with an enticing and important array of corporate risk issues that currently demand further attention and investigation.These range from questions of how are KRIs connected to financial performance, and what is their role in supporting organisations to survive during the COVID-19 pandemic?Accordingly, it will be interesting to have a statistical analysis based on a regression model that explores the potential positive correlation between the KRIs identified and profitability indexes.In the same way, a multiple case study will be useful to explore the relationship that exists between the CRP score and specific drivers of the company's performance, such as job orders, variability of returns, deferred payments, and employee absenteeism.Notes 1. Online database containing financial, personal, and commercial information on over 500,000 joint-stock and financial companies in Italy.2. Relying on indications for TA provided by Braun and Clarke (2006): the themes represent the milestones guiding the investigation path event until formulation of the research questions, while the codes identify and accumulate common information gathered to be then assigned to one or more themes.

Disclosure statement
No potential conflict of interest was reported by the author(s).

Figure 3 .
Figure 3. Thematic map of the integration between ERM and PMS.

Figure 4 .
Figure 4. Conceptual model for integration between ERM and PMS.

Ivo Hristov ,
PhD, is an Assistant Professor in Business Management and Accounting at the University of Rome Tor Vergata, Italy.His research areas include Accounting, Performance Management, Sustainable Strategies, Planning and Control.He is keen on integrating qualitative measures to performance management literature.In Rome, he teaches Performance Management, Financial Accounting and Managerial Accounting.Riccardo Camilli is a PhD Candidate in Business Management and Accounting at the University of Rome Tor Vergata, Italy.His research is focused on Performance Management and Behavioural issues in Accounting.In Rome, he is teaching assistant in courses of Financial Analysis and Performance Management.Antonio Chirico, PhD, is an Associate Professor of Accounting at the University of Rome Tor Vergata, Italy.His research interests are on Performance Analysis, Planning and Management Control of companies and public administrations.In Rome, he teaches Accounting and Planning and Control, and he is Director of the Master in Budget, Audit and Controls in Public Administrations.

Table 1 .
Main literature on the integration between ERM and PMS.

Table 2 .
Research protocol adopted in this study.