Indonesia Conference Directory

Enterprise Risk Scorecard (ERS) essentially is a Balanced Scorecard (BSC) combined with risk management. This experiment-s objective is to find out how risk management is applied to Indonesian SOEs in shipping companies using ERS. BSC focuses on objectives of company-s performance while ERS focuses on risk treatment that is perceived to affect the KPI achievement process. By 2018, Indonesia only had total of 19 ships and 226,948 deadweight tons and the number of ships which operated by SOEs is declining since 2014 and this affect the deadweight tons which also is declining. According to Indonesian Ministry of State-Owned Enterprise (SOE) Regulation for Good Corporate Governance (GCG) Application, risk management is an integral part of GCG by developing and applying risk management program as a whole strategic activity. This declining situation and the compliance due to Regulation of Indonesian Ministry of SOE for GCG then become the reason risk management must be applied in SOEs. Risk management in Indonesia is applied in two ways and they are done by paradigm of risk management and reward and punishment. Qualitative case study is used in this research with inductive approach and data is collected by interview. The results are risk management application using ERS for company A and company B is adopted by paradigm of risk management while for company C, risk management is adopted by reward and punishment. Reward and punishment model consider risk management as burden, sometimes it means costly and ineffective. Therefore, corporate tends to refuse applying risk management. On the other hand, regulation from central government insist of risk management appliance which make the BoD include risk management in their corporate governance mechanism by applying ERS. Management have two intentions of applying risk management and they are desire to get reward and fear for being punished by stakeholders. Paradigm model considers risk management as an internal need, even it is considered as strength. With this paradigm, BoD apply risk management in their corporate governance mechanism by applying ERS. ERS helps each company to apply risk management for the whole company to achieve their stated KPI by combining risk management into the BSC. By applying risk management with ERS, those companies will have a higher probability to achieve their own strategic KPI.