The Relationship of Enterprise Risk Management and Financial Performance in the U.S. Banks

Enterprise Risk Management has gained substantial importance in recent years as financial institutions face increasingly complex and dynamic risk environments. In the United States, commercial banks are vital to sustaining economic growth but are particularly vulnerable to credit, liquidity, and market risks due to the inherent volatility of the financial system. This study investigates the impact of Enterprise Risk Management implementation on the financial performance of U.S. banks. Grounded in Agency Theory and guided by the COSO ERM Framework and ISO 31000 principles, the research adopts a positivist philosophy and a deductive research design. An experimental strategy, coupled with a quantitative methodology, facilitates an empirical evaluation of the relationship between risk management practices and financial outcomes. Data were collected through a structured survey of 354 U.S. banks, with senior executives serving as primary respondents. Structural Equation Modelling using Smart PLS 4 was employed to assess the measurement and structural models and to test the research hypotheses. The study offers practical insights into the effectiveness of integrated risk management in enhancing financial performance and informs recommendations for strengthening ERM practices.