Key Risk Factors of Financial Holding Companies in Taiwan: An Integrated Approach of DEMATEL-Based ANP and Risk Management Balanced Scorecard

Wu, J. Z., and Hua, Y. H. 2018. Key Risk Factors of Financial Holding Companies in Taiwan: An Integrated Approach of DEMATEL-Based ANP and Risk Management Balanced Scorecard. NTU Management Review, 28 (2): 205-242. doi:10.6226/NTUMR.201808_28(2).0007

Jei-Zheng Wu, Associate Professor, Department of Business Administration, Soochow University, Taipei, Taiwan
Yu-Hua Hua, Master Student, Department of Business Administration, Soochow University, Taipei, Taiwan

Abstract

The objective of this study was to establish an evaluation mechanism of risk management performance for financial holding companies (FHCs) in Taiwan based on four dimensions (i.e., financial, customer needs, internal business process, and learning and growth). This study explored the key factors of risk management and their interrelation by applying a hybrid method of the balanced scorecard (BSC) and the DEMATEL method combined with the analytic network process (DANP). To fulfill these objectives, we collected data in two ways: semi-structured interviews with senior-level managers and a questionnaire distributed to experts employed in the risk management departments of FHCs. The DEMATEL results revealed that strategic, integration, management, and leadership risks have high prominence in the core factor zone of the relationship diagram. By contrast, risk factors such as credit, profitability, cost, reputation, trust, operation, and competitive risks require instant indirect control through the management of root-cause risk factors. In conclusion, combined with the DANP results, these results suggest that management and leadership risks were the two most important factors, and positive management tools as well as coordination and communication between head offices and branches are key to reducing risk in large and complex organizations such as FHCs. Standardized and regulated governance procedures are required. In addition, the results of a comparison between the DANP and AHP validated the necessity of using the DANP for evaluating interdependent dimensions and criteria in the context of the risk management BSC. 


Keywords

risk managementbalanced scorecard (BSC)analytic network process (ANP)


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