The impact of ISO 31000 adoption on the performance of banking companies in Indonesia

The complexity and volatility of the banking sector highlight the need for an effective risk management framework such as ISO 31000:2018. This study analyzes the effect of ISO 31000:2018-based risk management implementation on the performance and value of banking firms in Indonesia, by assessing the impact of three key components (principles, framework, and processes) on financial performance indicators. Using panel data from Indonesian banks (2019–2023) and path analysis, the study found that changes in ISO 31000:2018 implementation negatively impact ROE, with no significant impact on MtBV and ROA. The findings provide the first empirical evidence on the effectiveness of ISO 31000:2018 in an emerging market context, particularly the Indonesian banking sector, and provide practical implications for optimal risk management policies. This study contributes to the literature by uncovering the nuanced effects of risk management components on the sustainability and performance of banking firms in Indonesia.