The Effects of Corporate Risk Management and Financial Flexibility on Firm Resilience in Indonesian Manufacturing Firms
DOI:
https://doi.org/10.37641/jimkes.v14i2.5126Keywords:
Corporate Risk Management, Financial Flexibility, Firm Resilience, Manufacturing SectorAbstract
The period of 2020–2025 has been characterized by unprecedented global economic instability, placing the manufacturing sector under severe structural pressure and necessitating a comprehensive understanding of corporate resilience mechanisms. This study aims to investigate the integrative influence of corporate risk management and financial flexibility on the resilience of manufacturing firms in Indonesia. This study employs a quantitative causal-explanatory design to examine the relationships between corporate risk management, financial flexibility, and firm resilience in manufacturing firms listed on the Indonesia Stock Exchange (IDX) during 2020–2025. The sample was selected using purposive sampling. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicate that corporate risk management and financial flexibility both have significant positive effects on firm resilience, while the relationship between corporate risk management and financial flexibility is not significant. These results imply that firms can strengthen resilience through effective risk management practices and strong financial flexibility independently, highlighting the importance of developing both strategies separately to enhance organizational stability during periods of economic uncertainty.
Downloads
References
Acharya, V. V, Engle, R., & Pierret, D. (2020). Testing macroprudential stress tests: The risk of regulatory risk weights. Journal of Financial Economics, 136(3), 622–653.
Alfaro, L., Chari, A., Greenland, A. N., & Schott, P. K. (2023). Aggregate and firm-level stock returns during pandemics. Journal of Finance, 78(1), 1–45.
Arslan-Ayaydin, Ö., Florackis, C., & Ozkan, A. (2014). Financial flexibility, corporate investment and performance: evidence from financial crises. Review of Quantitative Finance and Accounting, 42(2), 211-250.
Bancel, F., & Mittoo, U. R. (2011). Financial flexibility and the impact of the global financial crisis: Evidence from France. International Journal of Managerial Finance, 7(2), 179-216.
Bates, T. W., Kahle, K. M., & Stulz, R. M. (2021). Why do U.S. firms hold so much more cash than they used to? Journal of Finance, 76(6), 2825–2871.
Berry-Stölzle, T. R., Che, X., & Xu, J. (2025). Enterprise risk management, external financing, and corporate investment. North American Actuarial Journal, 2(3), 1-34.
Bolton, P., Chen, H., & Wang, N. (2020). A unified theory of Tobin’s q, corporate investment, financing, and risk management. Journal of Finance, 75(4), 1773–1826.
Bonaimé, A. A., Hankins, K. W., & Harford, J. (2014). Financial flexibility, risk management, and payout choice. The Review of Financial Studies, 27(4), 1074-1101.
Dahmen, P. (2023). Organizational resilience as a key property of enterprise risk management in response to novel and severe crisis events. Risk Management and Insurance Review, 26(2), 203-245.
Drobyazko, S., Barwinska-Malajowicz, A., Slusarczyk, B., Chubukova, O., & Bielialov, T. (2020). Risk management in the system of financial stability of the service enterprise. Journal of Risk and Financial Management, 13(12), 300-311.
Durst, S., Hinteregger, C., & Zieba, M. (2024). The effect of environmental turbulence on cyber security risk management and organizational resilience. Computers & Security, 137(1), 103-114.
Ellul, A., & Yerramilli, V. (2021). Stronger risk controls, lower risk: Evidence from U.S. bank holding companies. Journal of Finance, 76(5), 2187–2232.
Fahlenbrach, R., Rageth, K., & Stulz, R. M. (2023). How valuable is financial flexibility during a crisis? Evidence from the COVID-19 pandemic. The Review of Financial Studies, 36(4), 1335–1374.
Florio, C., & Leoni, G. (2019). Enterprise risk management and firm performance. British Accounting Review, 51(1), 100–123.
Gius, D., Mieszala, J. C., Panayiotou, E., & Poppensieker, T. (2018). Value and resilience through better risk management. New York: McKinsey & Company.
Goldberg, J. (2021). Risk shocks, risk management, and investment. Macroeconomic Dynamics, 25(7), 1779-1809.
Graham, J. R., & Leary, M. T. (2018). The evolution of corporate cash. Review of Financial Studies, 31(11), 4288–4344.
Graham, J., & Kaye, D. (2015). A risk management approach to business continuity: Aligning business continuity and corporate governance. Connecticut: Rothstein Publishing.
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A primer on Partial Least Squares Structural Equation Modeling (PLS-SEM) (3rd ed.). Thousand Oaks: Sage Publications.
Islam, M., Wang, M., & Dewri, L. (2019). Financial flexibility-A synthesis of literature review. International Journal of Accounting and Financial Reporting, 9(1), 245-256.
Jia, J. (2019). Does risk management committee gender diversity matter? A financial distress perspective. Managerial Auditing Journal, 34(8), 1050-1072.
Kaftan, V., Kandalov, W., Molodtsov, I., Sherstobitova, A., & Strielkowski, W. (2023). Socio-economic stability and sustainable development in the post-COVID era: Lessons for the business and economic leaders. Sustainability, 15(4), 2876-2890.
Krstic, K., Westerman, R., Chattu, V. K., Ekkert, N. V, & Jakovljevic, M. (2020). Corona-triggered global macroeconomic crisis of the early 2020s. International Journal of Environmental Research and Public Health, 17(24), 9404-9414.
Malik, M. F., Zaman, M., & Buckby, S. (2020). Enterprise risk management and firm performance: Role of the risk committee. Journal of Contemporary Accounting & Economics, 16(1), 178-190.
Malynovska, Y., Bilonizhka, V., & Hrynchuk, T. (2025). Global economic shocks and business risk management. Green, Blue and Digital Economy Journal, 6(1), 42-50.
McShane, M., Nair, A., & Rustambekov, E. (2021). Does enterprise risk management increase firm value? Journal of Accounting, Auditing & Finance, 36(2), 271–287.
Mizrak, K. C. (2024). Crisis management and risk mitigation: Strategies for effective response and resilience. Trends, Challenges, and Practices in Contemporary Strategic Management, 4(1), 254-278.
Nguyen, Q. K. (2024). How does financial flexibility strategy impact on risk management effectiveness?. Sage Open, 14(2), 215-232.
Ogundu, P. G. (2025). The strategic implications of financial derivatives in hedging corporate exposure to global economic volatility. World J. Adv. Res. Rev, 25(1), 1218-1234.
Pankratz, N. M. C. (2021). Financial flexibility and the management of external shocks. Amsterdam: University of Amsterdam Press.
Riddick, L. A., & Whited, T. M. (2022). The corporate propensity to save. Journal of Finance, 77(2), 911–967.
Romero, J., Mesa, M., Minoli, C., & Aristizabal, J. (2025). Resilience after COVID-19: A global review of recovery strategies and their impact on demographic and economic sectors. Problemy Ekorozwoju, 20(1), 74–95.
Sağlam, Ü. (2025). Beyond GDP: COVID-19’s effects on macroeconomic efficiency and productivity dynamics in OECD countries. Econometrics, 13(3), 29-41.
Suarmanayasa, I. N., Pramesworo, I. S., Masela, A., Sucipto, B., & Launtu, A. (2024). Risk management strategies in the financial industry theoretical review and practical implications. Jurnal Ilmiah Manajemen Kesatuan, 12(4), 995–1004.
Suherwan, N. S., Rasyad Ariiq Utama, & Susy Muchtar. (2025). Risk management as a mediating variable in the influence of the board of directors on financial performance. Jurnal Ilmiah Manajemen Kesatuan, 13(1), 409–418.
Suprayitno, D. (2025). Risk management in global supply chains: an empirical study of multinational corporations. Jurnal Ilmiah Manajemen Kesatuan, 13(4), 2733–2744.
Wu, W., Le, C., Shi, Y., & Alkaraan, F. (2024). The influence of financial flexibility on firm performance: the moderating effects of investment efficiency and investment scale. Journal of Applied Accounting Research, 25(5), 1183-1202.
Zahedi, J., Salehi, M., & Moradi, M. (2022). Identifying and classifying the contributing factors to financial resilience. Foresight, 24(2), 177-194.
Zhang, X. (2025). Origin and development of financial flexibility: a systematic literature review. Economics & Management Information, 2(3), 1-16.
Zhao, N., Ren, J., & Chen, X. (2023). Strategic resource allocation in project management: a fusion of ERM and financial insights in the financial sector. Journal of Commercial Biotechnology, 28(1), 177-185.
