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The Risk Management of Nothing
Abstract
This essay challenges core elements of enterprise risk management (ERM) and suggests that an impoverished conception of 'risk appetite' is part of the 'intellectual failure' at the heart of the financial crisis. Regulators, senior management and boards must understand risk appetite more as the consequence of a dynamic organizational process involving values as much as metrics. In addition, ERM has operated as a boundary preserving model of risk management subject to the 'logic of the audit trail', rather than a boundary challenging practice which confronts and addresses the complex realities of interconnectedness. The security provided by ERM is at best limited to certain states of the world and at worst it is illusory - the risk management of nothing. In contrast, Business continuity management (BCM) may provide clues about how risk management might be reconstructed.
... This work draws on enterprise risk management (ERM), which argues that corporate risk disclosure could enhance the alignment of corporations with global supply chain concerns (Fligstein and Dauter, 2007) but, unfortunately, organizations' disclosure often fails to include indirect impacts (see Power, 2009). The analysis is conducted in two phases. ...
... Section 2 provides a literature review related to water risk reporting and the associated critical accounting discussions. Section 3 explores the translation of the risk society and modern risk perception (Beck, 1992) into the organizational context, drawing on Power's (2007Power's ( , 2009) conceptualization of ERM. Section 4 illustrates the methodology used in the study, whereas Section 5 explores the evolution of the different versions of the WSQ from its launch in 2010 until 2021. ...
... The theoretical framework of this paper is divided into two subsections. Subsection 3.1 explores the translation of the risk society (Beck, 1992) into the organizational context (Power, 2007) by building on the notion of operational risk, its governance and manageability and the institutionalization and limitations of ERM systems (Power, 2007(Power, , 2009. Subsection 3.2 connects the functionalities of ERM systems with one specific accounting technology, namely, corporate water risk reporting boundaries. ...
Purpose-This paper aims to investigate the foundations of corporate water risk reporting boundaries from an enterprise risk management perspective. To be more precise, the authors take the case of the CDP Water Security Questionnaire (WSQ) and explore the evolution of questionnaire itself as well as current corporate water risk reporting practices. Design/methodology/approach-This paper draws upon enterprise risk management theory to explore the evolution of reporting boundaries contained in the design of the WSQ. This paper also performs an empirical study using the content analysis of a homogeneous sample of 470 companies comprising 1,880 responses to the WSQ for the period 2018-2021. Findings-The analysis shows that despite the tendency for the questionnaire's design to focus on risk reporting and to align with other water reporting initiatives, both questions and responses remain severely limited. More precisely, evidence suggests that corporate water risk reporting is still strongly focused on direct impacts. Furthermore, the majority of water risk direct impacts are only recognized and are not subsequently assessed in the reports. Thus, the reports fail to provide the full picture of corporate water risk across global supply chains along with, arguably, a lack of discharge of corporate responsibility. Practical implications-Policymakers, corporations and academics may use these results to set out a future agenda for enhanced corporate water risk reporting. Social implications-The effective use of water resources is vital to human survival, but only a limited number of studies have addressed this problem. This paper focuses on this highly important issue and Prior drafts were presented in several research seminars at the Universidad de Burgos and Universidad
... However, many of these adaptations have struggled to consider how risk differs in the delivery of services. According to Power (2009), risk management in services should focus on more than mere compliance and become a strategic weapon of value creation. The adoption of models such as Value at Risk is typical of the financial services industry, which is at the forefront of risk management practices (Jorion, 2007). ...
... Risk management practices at the organizational level are examined by Mikes (2009). See Power (2009) who wrote on the risk management of nothing and its consequences for implementation. Simon (1995), on the other hand, viewed enterprise risk management as an application of technology. ...
... The evolution of enterprise risk management practices is extensively discussed in the works of Mikes and Kaplan (2015). Power (2009) explored the organized uncertainty of risk management. Woods et al. (2009) investigated the continuous improvement approach in risk management in public services. ...
The research investigated the relationship among Key Performance Indicators (KPIs), risk assessment capabilities and value creation in service sector firms. The study also sought to examine the effect of KPI`s components on risk assessment & value capitalisation, and how they either facilitate or hinder implementation, monitoring and continuous improvement processes. In this context, a quantitative cross-sectional research design was applied using an online survey of shared middle and senior managers in service organizations. After filtering, the final version of segmented sample included a total of 215 respondents engaged in different service businesses. The analysis was determined using Partial Least Squares Structural Equation Modeling. The results showed that all components of KPIs have significant positive relationships with risk assessment and value improvement outcomes First, performance drivers were found to be the most significant predictor of both constructs. As such, the results show that both risk assessment and value improvement had a positive effect on implementation/monitoring processes which in turn enabled continuous improvements. Performance measurement, risk management and value creation in service organizations: A performance at-risk-based conceptual model. The results have numerous managerial, practical and policy implications for the service sector. This drives home the necessity of creating integrated KPI systems that include risk assessment and value improvement factors. In building on existing theory, the study is of substantial interest in that it provides empirical evidence for these organizational mechanisms related to service organizations. Resilient Organizations in the Service Sector picture of Resilience across Performance Management with KPIs, Risk Assessment and Value Creation strategies offering a comprehensive foundation for sustainable organizational success.
... The focus on risk taking to realize opportunity had spawned the unintended consequences of greater and more uncontrollable risk that needed to be managed strategically to reduce its harms, thus shifting the strategic bases of risk studies from releasing opportunity towards controlling harm (Gephart et al., 2009). This focus on risk control to avoid putative harms gave rise to an even stronger epistemic base of risk professionals, risk managers, technical experts and risk metrics (Maguire & Hardy, 2013;Mikes, 2016;Power, 2004Power, , 2009). Yet, risk society also opened the avenue to question metrics as the epistemic basis of risk management, as these seemingly objective means of quantification encode meanings that attribute values to risk (Espeland & Stevens, 1998). ...
... Thus, the concept of risk became used to 'explain deviations from the norm, misfortune, and frightening events' (Lupton, 2013, p. 3). While society has always had a set of rituals, routines and beliefs to give a sense of control over certain risks as potential harms, contemporary rational thinking, technologies of evaluation (Power, 2004) and bureaucratic systems of prevention (Power, 2009) gave a greater sense of control over risks to humans (Lupton, 2013). Increasingly, the potential for harm became the dominant concept of risk (Lupton, 2013), with a focus on controlling those harms, including how the means of control socially constructs objects as risky (e.g. ...
... Bringing the two strategic bases of risk studies into a duality involves acknowledging their entanglement in constructing and containing risk (Tsoukas, 2017). As risk scholars note, the dynamics of this duality 'repeatedly renegotiate a tolerable balance between doubt and certainty, between danger and safety' (Turner, 1995in Calás, 1999 where shifting organizational values and ethical limits form an ecology of risk appetite (Power, 2009). It is, therefore, important that organizational scholarship examines how actors and organizations construct and work with the inherent duality of risk as both opportunity and harm. ...
Risk studies have rapidly expanded in the last few decades. Yet this growth is characterized by fragmentation in the literature despite it being a central concept for a vast array of organizations, where their success or failure to manage risk is considered central to thriving, surviving or collapsing. We take this opportunity provided by the Perspectives format to engage with a selection of six diverse papers published in Organization Studies over four decades. Drawing from these papers, we trace the evolution of risk research in relation to its epistemic bases in either metrics or values and the strategic focus on risk as either harm or opportunity. Inspired by the tensions between each of these bases, our review of the selected articles illustrates the dynamic entanglement of these ostensibly distinct and polarised strategic and epistemic bases of risk studies. We then develop a conceptual framework to map the field of risk research and propose avenues for future research. Our framework enables us to propose a stronger focus on risk taking for opportunity, warn against becoming overly focused on the metrics for controlling harm especially in the face of enticing visualizations of harmful risk, and strongly assert values as an important epistemic basis for risk studies. As these values may be hidden or visible, we emphasize the importance of understanding whose values are foregrounded in proposing a research agenda for reclaiming societal benefit. This latter focus is a neglected area of risk studies yet vitally important in addressing the big societal issues of our time.
... Most of the research in French focuses on internal control in the accounting and financial sense of the term, oriented toward ensuring accurate financial reporting, and does not really take into account its more strategic aspects, as reflected in the concept of ERM. The work of Power (1997Power ( , 2004Power ( , 2007Power ( , 2009) provides a broader perspective, highlighting the ability of internal control, and more generally ERM, to stimulate more strategic thinking and to promote the conception of disruptive futures (Power, 2009). Another strand of the literature, exemplified by the work of Mikes (2009Mikes ( , 2011 in particular, seeks to highlight the different logics of ERM systems and identifies several that correspond to very different, even conflicting, considerations and methods. ...
... Most of the research in French focuses on internal control in the accounting and financial sense of the term, oriented toward ensuring accurate financial reporting, and does not really take into account its more strategic aspects, as reflected in the concept of ERM. The work of Power (1997Power ( , 2004Power ( , 2007Power ( , 2009) provides a broader perspective, highlighting the ability of internal control, and more generally ERM, to stimulate more strategic thinking and to promote the conception of disruptive futures (Power, 2009). Another strand of the literature, exemplified by the work of Mikes (2009Mikes ( , 2011 in particular, seeks to highlight the different logics of ERM systems and identifies several that correspond to very different, even conflicting, considerations and methods. ...
... 2.2.2. FROM "RULE-BASED COMPLIANCE" TO THE "CRITICAL IMAGINATION OF ALTERNATIVE FUTURES": POWER'S CONTRIBUTIONS In a number of publications, Power (1997Power ( , 2004Power ( , 2007Power ( , 2009) describes the institutionalization of risk management in an "audit society" (Power, 1997) characterized not only by the explosion of external audit activities but also by the implosion or internalization of audit through the rise of internal control and risk management. Power believes that risk management is colonizing more and more areas of the lives of private and public organizations (Power, 2004(Power, , 2007. ...
... Regulatory guidelines cannot resolve the issue of materiality, as it is a severe problem in heavily regulated industries such as banking and insurance (Acharyya and Johnson, 2006;Deighton et al., 2009;Nielson et al., 2005;Paape and Speklè, 2012;Thomson, 2007). What to report and not report remains unclear (Power, 2004(Power, , 2009, and this can cause confusion. ...
... The connectivity of risks in reporting significantly impacts stakeholder responsiveness to reporting boundaries. These boundaries define the extent to which every risk in the organization is unreported or significant risks are left behind (Power, 2004(Power, , 2009). IR plays a significant role in annual reports, lending a more cohesive, efficient and holistic view of the risks faced by an organization (Stent and Dowler, 2015). ...
... It also involves the collection, interpretation, analysis and assessment of risk information, as well as informing the board in an integrated manner (Ballou et al., 2012;Sobel and Reding, 2004). Despite several criticisms of the value of ERM (McShane et al., 2011;Power, 2004Power, , 2009), similar to IR (Flower, 2015), ERM practices have flourished in financial institutions (Lam, 2000(Lam, , 2014Paape and Speklè, 2012). COSO (2004) stated that ERM was aimed at achieving an entity's four objectives: achieving strategic goals aligned with and supporting its mission, effective and efficient use of its resources in operations, reliability of reporting and compliance with applicable laws and regulations. ...
Purpose
In the last two decades, risk reporting has followed a normative and calculative culture rather than the “materiality” of data. Although integrated reporting (IR) has become flooded with extra information, it does not adequately disseminate material information to stakeholders. In addition, the poor tone from the top diminishes creativity. This study aims to investigate how companies creatively address issues of the materiality of risk information in IR and how IR can be aligned with enterprise risk management.
Design/methodology/approach
Qualitative research was conducted via interviews with 50 chief risk officers and senior management executives in the Indian and UK insurance markets.
Findings
Overall, five institutions were observed to exhibit elements of being early adopters of institutional creativity. This confirmed the present study’s theoretical contribution of five divergent types of early adopters. The motivations for creativity are reflected in the resources available to these institutions.
Originality/value
To the best of the authors’ knowledge, this study provides a new insight into IR from internal mechanisms to deal with issue of materiality.
... However, the inherent nature of banking entails risks such as credit defaults, market fluctuations, operational failures, liquidity shortages, and threats of insolvency. The global financial crisis of 2008 revealed how inadequate risk management can put individual institutions and entire financial systems at risk when risks materialize (Power, 2009). Due to the importance of the banking sector to economic stability, banks must implement robust risk management practices to mitigate threats and enhance resilience. ...
... There are numerous classifications and taxonomies of banking risk in the academic literature. Power (2009) identified four types of risk discourse in banking: minimal risk management, scientific risk management, uncertainty management, and sociocultural approaches. Fraser et al. (2009) classified banking risks as institutional, technical, social, and human. ...
... Academics have proposed a number of frameworks for executing risk management in the banking industry, which are frequently adapted from general risk management standards. Power (2009) proposed risk management systems based on five pillars: event recognition, risk evaluation, risk reporting, risk treatment, and crisis response. McNeil et al. (2015) defined risk governance instruments, such as defining risk appetite, instituting control policies, constructing risk data systems, and instilling risk culture. ...
This bibliometric analysis examines the evolution of academic research on banking risk management over the past four decades. The research maps publication trends, influential works, authorship, geographical distribution, conceptual themes, and future research directions using quantitative analysis of 286 English-language articles from the Scopus database. Since the 1990s, publication output and citations have been on the rise, with peaks in 2012 and 2019, indicating a rise in scholarly interest. The focus of research has expanded beyond credit risk to include operational, liquidity, and other key risks. Governance and culture are also expanding areas of emphasis. Geographic diffusion is revealed by bibliometric mapping, shifting from the early dominance of U.S. and European scholars to the increasing contributions of Asia and other emerging economies. Analysis of frequently occurring keywords illustrates the importance of fundamental risk management concerns. Six conceptual domains are identified by cluster analysis: operational risks, governance, liquidity risks, commercial bank risks, credit risks and performance, and market risk interactions. Based on the bibliometric analysis and research findings, three promising future research directions are proposed: the impact of pandemics and natural disasters on bank risk management; emerging threats such as cybercrime and climate change; and the impact of risk culture and governance on outcomes.
... Drawing on the existing literature, we argue that in order for an organisation to effectively use ERM to develop and maintain resilience, it needs to recognise the strategic value-creating capabilities of ERM. These capabilities should extend beyond compliance with external requirements, such as regulations for the purpose of establishing legitimacy (Power, 2009). Nevertheless, it is important to recognise that compliance-type processes, e.g., risk control, disaster recovery plans, and business continuity planning, can have a significant and positive impact on resilience if applied quickly in times of crises (Bhamra et al., 2011). ...
... Cognitive resources should be reallocated from box-ticking to the actual management of risks, according to Power (2009). Consistency in perceptions is important for the success of the risk control process according to Woods (2009), andCaldarelli et al. (2016) contend that communication is necessary for the emergence of shared perceptions, otherwise there is a risk that individual autonomous conflicting opinions persist. ...
... Risk artefacts may be predominately designed and used in the assessment and mitigation of preventable/controllable risks, but they can also be designed and used to augment improvisation in social spaces shared by risk experts and business managers, or to enhance organisational learning by improving risk communication across distributed organisational actors (Klein & Reilley, 2021). Human cognition can be limited to focusing on risk prevention and control from a compliance perspective (Power, 2009), or extended to include creative problem solving to enter a new state by engaging in strategic decision-making (Corvellec, 2010). ...
This study empirically examines the role of enterprise risk management (ERM) in developing and maintaining resilience resources and capabilities that are necessary for an organisation’s strategic transformation towards sustainability. Data was collected through 25 semi-structured interviews, one non-participant observation, and secondary sources in the context of a Swedish mining company undergoing a high-risk strategic transformation towards full decarbonisation. Following the temporal bracketing approach (Langley in Academy of Management Review 24:691–70, 1999) and employing thematic analysis (Gioia in Organizational Research Methods 16:15–31), the data was structured and analysed according to three phases from 2012 to 2023. The findings show: first, different ERM practices, such as risk governance frameworks, risk culture, risk artefacts, and risk awareness, influence resilience resources and capabilities. Second, the evolution of risk management practices from traditional risk management to ERM is an ongoing developmental process to ensure that risk management continues to be aligned with the company’s strategy. Third, in tandem with strategic changes, resilience in terms of resources and capabilities emerges over time and develops through a series of events, gradually enhancing the company’s ability to manage risks and uncertainties associated with multidimensional sustainability challenges. These results contribute to the ERM literature that follows the dynamic capability approach and also focuses on the relationship between ERM and strategy by adding more detailed empirical evidence from the risk management literature in relation to resilience resources and capabilities. Additionally, the results contribute to the resilience literature that follows a developmental perspective.
... Moreover, firms that become overly reliant on risk management may be more likely to miss out on new opportunities or take excessive precautions that limit growth and innovation. For example, Power (2009), when referring to ERM, mentioned a necessary impoverishment of the conception of risk appetite as an organizational process. Also, ineffective or poorly designed risk management practices may adversely affect performance (Sifumba et al., 2017). ...
... The last trend in the field emphasizes the role of implementation of green policies at the organizational level, such as reducing carbon footprint, conserving energy, minimizing waste, and embracing renewable resources (Feniser et al., 2017). The effectiveness of ERM practices could be influenced by various factors, such as the commitment of top management, available resources, and external stakeholder expectations (Ahmed et al., 2023;Power, 2009). ...
Micro, small, and medium-sized enterprises (MSMEs), one the pillars of any economy, comprise the majority of enterprises, while their performance remains modest comparatively with large companies. The dynamic nature of the business landscape, coupled with insufficient resources, increases the vulnerability to risks and threatens the long-term sustainability of MSMEs. A large body of literature emphasizes the positive impacts on business performance from implementing a comprehensive risk management framework. However, in the case of MSMEs, the relationship is still unclear due to the substantial investments required and the lack of skills and knowledge these companies encounter. This study analyses the bibliometric data of 531 articles indexed in Scopus and Web of Science databases to identify the literature trends concerning the connection between risk management and performance in MSMEs. Results show a growing interest in the subject starting from 2010, but the different ways of understanding the performance lead to a disparity of conclusions. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
... In contrast, Italy's predominant reliance on a rules-based approach may limit its responsiveness to dynamic risk environments, although it must be noted that Italy generally fails to recognize broader non-financial risks in its regulatory framework, which may explain this dominance. In essence, although rulebased approaches provide a strong foundation and ensure the necessary compliance, complementing them with principlebased strategies might be useful for remaining adaptable and resilient in the face of steadily evolving risks (Power 2004(Power , 2009). ...
... This commonality suggests an area for a paradigm shift toward recognizing risks as opportunities, promoting a more dynamic and forward-thinking RM culture (Azim and Nahar 2021;Barrett 2019;Gong, Vesty, and Subramaniam 2022) RM drivers France and Germany exhibit a balanced use of coercive and normative pressures to drive RM practices, indicating a more flexible and potentially more effective approach compared to Italy's reliance on coercive pressures underscoring a compliance-oriented approach (Azim and Nahar 2021;Carlsson-Wall et al. 2019) RM design The interplay between rule-based and principle-based approaches in France and Germany points to an effort to maintain adaptability in RM. Italy's preference for rule-based approaches may limit its responsiveness to evolving risk landscapes (Mahama et al. 2020;Power 2004Power , 2009 Actors' roles and responsibilities ...
In recent years, public organizations have come under increasing pressure to implement comprehensive risk management (RM) systems that are based on international frameworks and standards. However, little is known about whether different countries have addressed this issue in their regulatory strategies and how they have done so. To address this gap, this study conducts a cross‐country analysis and introduces and applies an analytical framework to compare the different RM approaches adopted by the central governments of France, Germany, and Italy. This comparison sheds light on the regulatory landscape in the three largest countries in the European Union and reveals the diverse RM frameworks with varying focuses, drivers, designs, and levels of integration. Although each country has unique nuances in its approaches, commonality is the primary perception of risk as a threat. This stance, although understandable in the context of financial risks, calls for a shift toward viewing risk as an opportunity, thus promoting a balanced approach that goes beyond mere compliance.
... Mulligan and Oats (2009) explore tax aggressiveness as a manifestation of low risk aversion and find that, whereas a formal document expressing the risk strategy or policy of the firm may not exist, tax practitioners within the firm have a clear understanding of the firm's risk appetite. Power (2009) laments the "impoverished conception of "risk appetite"" (p. 850) to an auditable organisational process. ...
... 850) to an auditable organisational process. Moreover, Power (2009) argues that the concept of risk appetite invokes "the neoliberal postulation of organizations as "enterprising" selves" (p. 850) rather than having a precautionary meaning. ...
Purpose
The purpose of this paper is to garner a deeper understanding of the site of influence of aspects of risk management for tax practitioners.
Design/methodology/approach
The research design is twofold. Phase one consisted of a wide-scale international survey with 1,061 tax experts across 59 jurisdictions. In phase two, the authors followed up with 68 semi-structured interviews with tax practitioners working in 11 different countries.
Findings
The findings recognise the importance of the firm as a significant “site of influence” for tax practitioners in shaping their risk appetite in their tax work. The firm eclipses other influences of risk such as professional body oversight, public interest and demographic markers such as gender and career stage. The authors show that firm is significant, irrespective of size of firm.
Practical implications
This work has practical implications as the findings highlight the importance of oversight of professional service firms by both the professional accountancy bodies and revenue authorities. The findings may have impact on the ethical training and guidance for trainee accountants in terms of an increased awareness on the employing firm as a site of influence for tax practitioners.
Originality/value
This research is important as it adds to the significant body of work on firm socialisation and highlights the important role that the firm holds in moderating (or exacerbating) the risk appetite of tax practitioners, which has significant implications in terms of pushing the boundaries of tax aggressive behaviours. The work aims to recognise the important role that tax practitioners can have in moderating aggressive tax practice, and, thus, reducing tax inequalities and shaping a better world of “Reduced Inequalities” (SDG10).
... Other studies have illustrated how using risk tools (i.e., artefacts materialising risk representations) diagnostically can provide a coherent strategic direction for organisational actors who receive risk-based performance feedback (Carlsson-Wall et al., 2020;Giovannoni et al., 2016). It has been argued that boundary systems, which standardise procedures, can hinder the addressing of uncertainties and in the worst case become illusory (Power, 2009). However, boundary systems are important for managing operational risks, especially when organisations face high financial and reputational costs of noncompliance (Arjaliès & Mundy, 2013). ...
This paper examines the role of boundary systems in operational risk management. The paper is based on a case study of a large Scandinavian bank for which effective Anti-Money Laundering (AML) is a regulatory requirement. Relying on interviews as the primary data source, the study demonstrates how the management control system develops over time in response to regulatory intervention. While the literature has previously accentuated the role of interactive and diagnostic systems in strategic risk management, this study demonstrates the importance of boundary systems in operational risk management. Establishing a separate diagnostic system for AML reporting was ineffective and so was embedding AML in the interactive budgeting system. Instead, establishing AML as a boundary system that delineates rules to be followed rather than opportunities to be sought counterbalances the beliefs systems in decentralised organisations, where effective AML is a prerequisite licence to operate and engage with strategic risks. This paper is one of the first to unravel how boundary systems can be established and operated as part of a management control system. The case study is not only relevant to the banking sector but practitioners in other settings may also consider how boundary systems can ensure effective operational risk management.
... For instance, McShane et al. [20] do not find any positive relationship between insurance firms achieving a higher S&P ERM rating and firm value. More generally, a few papers have criticized the role and relevance of ERM for engaging in risk management issues by various organizational forms [24] or for business continuity management purposes [25]. However, the impact of specific forms of risk, e.g., market and/or idiosyncratic risk, on the financing, accountability and effective management control of organizations affected has not attracted any attention from researchers studying ERM adoption. ...
This study provides the first evidence of the propensity of globally large industrial US and European firms to adopt enterprise risk management (ERM) processes in response to the recent challenges of systematic global risks associated with pandemics (COVID-19), increased geopolitical risks (e.g., the Ukraine–Russia conflict), increased cybersecurity threats and the challenges posed by climate change and biodiversity loss. Consistent with the predictions of standard risk management theory, it is predicted that there is a positive inter-relationship between the propensity to adopt ERM and total firm risk, after controlling for various firm-related financial characteristics, complexity and sources of idiosyncratic risk. The empirical research is based on an industry-matched sample of the 100 largest US and European firms globally. The empirical results are generally consistent with these predictions, but for European firms, total firm risk is not associated with ERM adoption. Furthermore, there is no statistically significant relationship between sample firms’ risk-adjusted performance and their ERM adoption propensity, and there are also significant cultural–institutional variations that explain the differences between the ERM adoption practices between US and European sub-sample firms. The findings raise new questions about the validity of ERM in addressing globally important risk challenges faced by the largest multinational firms.
... The discovery of fraud incidents that befell the Village Credit Institution, made public confidence in the Village Credit Institution as a village financial institution to save their funds decreased. To prevent fraud, the Village Credit Institution needs to improve governance over the management of public funds (Power, 2009). One way to improve governance as mandated by the Bali Regional Regulation is through supervision conducted by the Village Credit Institution Empowerment Agency. ...
The Village Credit Institution Empowerment Agency needs to build risk management at the Village Credit Institution to effectively implement risk-based performance audits. The Village Credit Institution Empowerment Agency must guide to develop policies related to fraud prevention at the Village Credit Institution to secure public money. The informants in the study were the coordinators of the Village Credit Institution Empowerment Institution of Tabanan Regency, Badung Regency, and the Chairperson of the Village Credit Institution Empowerment Institution of Bali Province. Selection of informants using snowball sampling technique. The case study analysis unit uses a thematic analysis approach, where the themes carried are risk management, risk-based performance audits, and fraud handling at the Village Credit Institution Empowerment Agency. The results of the analysis and explanations from informants show that risk management at the Village Credit Institution in Tabanan and Badung Regencies still needs improvement, including risk management policies, and risk registers. The Tabanan and Badung Regency Village Credit Institutions Empowerment Institutions in preparing audit plans have not been based on risk registers. The Bali Province Village Credit Institution Empowerment Agency has not made a fraud control policy for Village Credit Institutions.
... there is now a concern about how to properly integrate risk management into management accounting control system (MAcS) as a whole, supporting PSOs, policymakers, and managers alike (Arena et al., 2017;Bracci et al., 2022). researchers have stressed the necessity of integrating risk management into the creation of organizational goals and objectives, in MAcS to alter their current budgeting and accountability methods, and in their overall business processes to ensure that the organizational activities there are risk-laden (Power, 2009). the incorporation of enterprise risk management into organizational control packages is the primary area of emphasis for Braumann et al. (2024). ...
This research seeks to examine the influence of the integration of management accounting control systems and risk governance (MACS-RG) on organizational resilience (OR) in public sector organizations (PSO). This investigation endeavors to offer critical insights in the enhancement of OR in the PSO by investigating the components of MACS-RG. The authors employ a two-phase methodology, incorporating both qualitative (Study 1) and quantitative (Study 2) approaches. The authors utilize qualitative research to reveal significant insights and develop a framework, which is later evaluated in the quantitative phase. The research results shed light on the significantly positive relationships among various components of MACS-RG, including continuous planning, internal control, increasing network with external stakeholders, performance measurement, risk management, with OR enhancement. The study holds important implications for managers, researchers, and individuals engaged in the making, implementing, or evaluating of decisions pertaining to the enhancement of OR via MACS-RG. The paper will delineate the strategic interventions necessary for the effective MACS-RG within the PSO context.
... It is debated whether the aspiration of ERM is to furnish compliance, to improve risk culture or to improve strategic decision-making (Agarwal and Kallapur, 2018;Viscelli et al., 2017) or whether it is just an administrative burden (Abraham and Shrives, 2014;Shimpi and Lowe, 2006). Later, some criticize the effectiveness of the overall approach of ERM (Power, 2004(Power, , 2009. ...
Purpose
This study aims to explore the adoption of enterprise risk management (ERM) in developing and developed countries. Is there a similarity or difference between the two contrasting institutional markets and the reasons behind them?
Design/methodology/approach
The adoption of ERM is analyzed on the basis of the institutional framework. The author draws empirical evidence by comparing the cases of a British and an Indian insurance company using evidence from multiple sources. This paper focuses on extra-organizational pressures exerted by economic, social and political situations across two countries that influenced the adoption decision of ERM.
Findings
The findings of this research revealed that early adopters of ERM in different institutional markets face coercive and normative pressure but not mimetic pressure. The adoption of ERM in India and the UK is dissimilar. Companies in the British insurance market encounter higher institutional forces than those in the Indian market because of higher coercive and normative pressure. The aspirations to adopt ERM in the Indian and UK markets included improved strategic decision-making to maintain stakeholder expectations and higher standards of corporate governance. In the UK, ERM was adopted to reduce surprises and fluctuations under flexible regulations but with stricter adoption and to improve credit ratings.
Originality/value
Previous literature has discussed ERM adoption in similar markets or within one market with similar institutional pressure. In contrast, this research is a comparative study that explains the analysis of institutional theory in two different institutional environments in the adoption of ERM.
... Therefore, institutionalising ERM requires a re-evaluation of our understanding of the roles other professionals and risk managers play in evolving ERM systems (Giovannoni et al., 2016). In contrast with TRM which is "boundary preserving" rather than "boundary spanning" (Power, 2009), ERM necessitates that everyone in the organisation assumes some level of responsibility for managing risks and are therefore involved in ERM embedding (Jabbour & Abdel-Kader, 2015). Accordingly, boundary-spanning, i.e. distributed forms of ERM, are more sophisticated because risk ownership is cascaded from board level to business unit managers, whereas centralised ERM has a single risk owner. ...
... Furthermore, a positive Attitude can be cultivated by stressing the importance of and counteracting prevalent Perceived Risk and Anxiety. Perceived Risk's negative effect could be countered by the implementation of risk management (Power, 2004(Power, , 2009, including A/B testing (Deng et al., 2017), bandit services (Malekzadeh et al., 2020), and canary deployments (Tarvo et al., 2015). Robots could also have the ability to run without visual representation to ensure privacy (Syed et al., 2020). ...
Intelligent process automation (IPA) augments symbolic process automation using artificial intelligence. Emulating human decision-making, IPA enables the execution of complex processes requiring decision-making capacities. IPA promises great economic potential as it enables more efficient use of the human workforce. However, the adoption rate in practice falls behind these potentials. Our study aims to investigate reasons and identify areas for action towards IPA adoption. To this end, we identified 13 determinants and created an extended UTAUT model. We tested the model with partial least squares structural equation modeling for significant influential relationships between the determinants based on a user study. We contribute to theory and practice finding a special role of trust and transparency for the adoption of IPA. Likewise, we show that organizations should cultivate a positive attitude towards IPA diffusion. Further, our results contribute with a focus on the potential adopters as IPA adoption is contingent upon their characteristics, such as experience and job level.
... Ritualistic and self-perpetuating auditing is, therefore, the product of a means-end decoupling, where control and monitoring become ends in themselves (Bromley and Powell 2012). Strictly connected to this, public audit has been criticized for having easily turned into a legal exercise, generating an illusory sense of security (Power 1997(Power , 2009). Within such a defensive approach, based on satisfaction of legal requirements and rule-based compliance, it is difficult to stimulate practitioners' enthusiasm and engagement and, therefore, create opportunities for organizational learning (Vinnari and Skaerbaek 2014) and value creation. ...
The purpose of this article is to contribute to the ongoing debate on the internal audit function in the public sector, by discussing the role that this function can play in addressing the following issues: (i) the complex and fragmented structure of internal control systems resulting from the progressive layering of multiple audit bodies and assurance providers with different standards and tools, and possible overlapping competences and activities, and (ii) the emphasis of internal controls on monitoring, which has become an end in itself, with no attention to value creation. To this end, the article examines the evidence from a research project aimed at improving the internal control system of public healthcare organizations in an Italian region (i.e., Emilia‐Romagna) that has long since reflected on public audit issues. Findings shed light on the activities and tools developed and implemented by the regional audit team and the internal auditors. The article provides some significant research contribution in that, drawing on the theoretical lens provided by Miller and Power, it reveals how the internal audit function can improve integration and coordination within the internal control system and foster a risk management culture that enables organizational learning.
... The understanding of risk and harm, as well as how they interrelate, varies greatly across domains. For legal, policy, organizational, or actuarial purposes, risk is typically approached through quantifiable measures and anticipatory models of potential adverse or harmful events such pandemics, financial losses, health and safety incidents, or operational disruptions [63,147,151,170]. Risk is therefore not inherently an issue of morality and can be understood as a contextdependent and relational concept-that is, expressed in relation to how factors like technical developments, organizational structures, or innovation may adversely impact a desired future and be variously interpreted by different actors [234]. ...
Responding to the rapid roll-out and large-scale commercialization of foundation models, large language models, and generative AI, an emerging body of work is shedding light on the myriad impacts these technologies are having across society. Such research is expansive, ranging from the production of discriminatory, fake and toxic outputs, and privacy and copyright violations, to the unjust extraction of labor and natural resources. The same has not been the case in some of the most prominent AI governance initiatives in the global north like the UK's AI Safety Summit and the G7's Hiroshima process, which have influenced much of the international dialogue around AI governance. Despite the wealth of cautionary tales and evidence of algorithmic harm, there has been an ongoing over-emphasis within the AI governance discourse on technical matters of safety and global catastrophic or existential risks. This narrowed focus has tended to draw attention away from very pressing social and ethical challenges posed by the current brute-force industrialization of AI applications. To address such a visibility gap between real-world consequences and speculative risks, this paper offers a critical framework to account for the social, political, and environmental dimensions of foundation models and generative AI. We identify 14 categories of risks and harms and map them according to their individual, social, and biospheric impacts. We argue that this novel typology offers an integrative perspective to address the most urgent negative impacts of foundation models and their downstream applications. We conclude with recommendations on how this typology could be used to inform technical and normative interventions to advance responsible AI.
... The concept of risk management in the public sector was initially seen as a target and a quantifiable process within the legal framework of uncertainty. However, since risk management is considered a tool that can support policy choices and decisionmaking, the concept of risk management has evolved into a process that considers immeasurable uncertainty and unknown risks (Mikes, 2011;Power, 2009;Spira & Page, 2003). Countries such as Australia, New Zealand, the UK, and Canada have implemented effective risk management frameworks in their public sectors (Bui et al., 2019;Rana(1) Proceedings of the 6 th Industrial Engineering and Operations Management Bangladesh Conference Dhaka, Bangladesh, December 26-28, 2023 © IEOM Society International et al., 2019). ...
... Finally, risk management is increasingly visible and certified to the public because of its role in defining the integrity and legitimacy of the enterprise. Power (2009) • The third category includes those that examine the specific channels through which risk management adds value to the enterprise (Onopriienko et al., 2023). ...
The article presents innovative approaches to improving the risk management process in the context of developing a strategy for foreign economic activity of enterprise. To identify risks and choose the optimal strategy for foreign economic activity of enterprises (FEA), economic and mathematical modelling was used using the risk matrix and the criteria of Bayes, Laplace, Wald, Savage, Hurwitz, Hodge-Lehman. To approbate the results of the study, enterprises of the pharmaceutical industry were selected. According to the theory of games, in order to improve the risk management process, elements of the payment matrix have been applied, which characterize the profit of pharmaceutical enterprises in foreign economic activity. The use of the Hurwitz criterion, which is a criterion of pessimism-optimism, made it possible to choose the optimal strategy for the selected enterprises. The developed matrix of risks of foreign economic activity (strategic, operational, financial and external) for the selection of the optimal strategy of foreign economic activity through the use of economic and mathematical modelling should be used to determine the risks of the greatest impact at different stages of foreign economic activity using the theory of games. The presented matrix of risks of foreign economic activity is built for domestic enterprises of the pharmaceutical industry and is aimed at improving the process of risk management of foreign economic activity, which will enable enterprises of the pharmaceutical industry to predict risks at the early stages of activity and take into account in the general concept of the strategy of foreign economic activity of enterprises. The pharmaceutical industry of Ukraine was chosen for research because it is the most popular in modern conditions, and, according to the results of the analytical review, very high-risk. That is why the use of economic and mathematical modelling for risk calculation allows to optimize the economic behaviour of domestic pharmaceutical enterprises, while providing a reliable basis for making sound strategic decisions in the process of risk management in the context of developing a strategy for foreign economic activity. The risk management process, consisting of 7 stages and 18 steps, has been improved, and innovative tools have been proposed that facilitate the implementation of risk management in the enterprise in the process of developing a foreign trade strategy. The use of economic and mathematical modelling in risk forecasting and the formation of a foreign economic activity strategy will help enterprise managers to significantly increase management efficiency, reduce risks at the stage of planning foreign economic activity. The article improves the risk management process, which consists of 7 stages and 18 steps, and offers innovative tools that facilitate the implementation of risk management in the enterprise in the process of developing a foreign trade strategy. The use of economic and mathematical modelling in risk forecasting and the formation of a foreign economic activity strategy will help enterprise managers to significantly increase management efficiency, reduce risks at the stage of planning foreign economic activity.
... Corporate failures and scandals have often been attributed to individuals like board members and executives. However, Power (2009) argues that the system itself also bears responsibility. Risk management, as a social construct, is influenced by its surrounding environment (Bhimani, 2009). ...
This research aims to explore the role of the board in cor-porate governance (CG) and risk management within the context of Islamic banking. Given the global reach of fi-nancial institutions, it is important to compare and evalu-ate the unique position of Shari’ah committees or Shari’ah Supervisory Board (SSB) in addressing the unique risks of Islamic banks. Using a comparative analysis, this study evaluated risk management guidelines in the CG codes of the United Kingdom, Germany, Saudi Arabia, and Malaysia. It found that board were ultimately responsible for risk management, regardless of the governance structure, and Shari’ah-related risks fell under the board’s purview. An innovative blend of Western CG frameworks and Islamic principles enhanced governance robustness through the strategic collaboration between board and SSBs.
... This study spans nearly two hundred and fifty research papers and over forty geographies and covers at least a dozen industrial sectors and subsectors from high-quality peerreviewed journals. It provides an extensive review of literature, including vast contributions from management scholars, which were deemed 'under-par' by leading ERM scholars (Beasley et al., 2015;Bromiley et al., 2015;Gordon et al., 2009;Power, 2009). By doing so, this paper makes several contributions. ...
... There are inconsistencies in the ways the concept is defined as stakeholders have not agreed on a specific definition of ERM (Lundqvist, 2014). Notwithstanding, the definitions as given by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and Casualty Actuarial Society Committee on Enterprise Risk Management (CAS, 2003) have been the most prominent among the various definitions with COSO's definition being the widely used in ERM studies (Power, 2009;Lundqvist, 2014;Sithipolvanichgul, 2016). ...
ABSTRA C T This study titled enterprise risk management: a guide to its implementation was carried out with a view to providing an insight into how ERM should be implemented by would be organizations. This study carried out a review of the requirements of regulatory bodies such as Sarbanes-Oxley Act of 2002, guidance of different frameworks like COSO (2004), various acts and report as well as the activities of rating agencies such as Standard and Poor with respect to risk management with the help of qualitative design. The study found that more emphasis was placed on risk governance structure and risk management procedures/processes. With respect to the governance structure, one of the key features is the assumption of far reaching risk management responsibilities by the board and management. On the other hand, risk management philosophy, risk appetite and tolerance sit at the very heart of the risk management processes. The study recommended that setting up risk management goal; establishment of effective risk governance structure; appointment of chief risk officer and setting up of risk management committees; establishment of risk management procedures; training of risk management personnel; implementation of the risk management procedures; and evaluation of risk management activities by comparing the achieved goal with the set risk management goal should be the necessary steps for firms willing to implement ERM.
... Adams (2012) emphasizes the integrative role of directors in ensuring an effective risk oversight structure. The RC provides real-time insights into the bank's risk management, a point highlighted by Power (2009) in the context of real-time risk assessments. Furthermore, Beasley et al. (2010) stress the significance of the CFO for understanding the bank's financial health and associated risks, and how the CFO communicates these insights to the RC and CRO. ...
This study investigates the impact of risk governance on bank risk within the Organisation for Economic Co-operation and Development (OECD) public commercial banks. Utilizing Knight’s (1921) distinction between risk and uncertainty, it emphasizes the roles of key figures like bank directors, the chief risk officer (CRO), and the chief financial officer (CFO) in risk management. The research employs multivariate regression analysis and principal component analysis (PCA) to reveal a positive correlation between risk governance and the Tier 1 capital ratio, indicating that effective governance leads to reduced bank risk and increased financial stability. This finding is consistent with Aebi et al.’s (2012) study on risk management and bank performance. These results underscore the crucial role of robust risk governance in banking, suggesting that enhanced governance practices can significantly mitigate risks. The study contributes to the existing literature by providing empirical evidence supporting the quantification of risk through governance mechanisms, aligning with, and enriching current theoretical frameworks. While highlighting the importance of these findings, the study also acknowledges its limitations, such as potential endogeneity issues, and suggests directions for future research to expand the understanding of risk governance’s impact on bank behavior, including the exploration of additional variables and the integration of qualitative methodologies. This research holds significant implications for banking institutions and regulatory bodies, advocating for a deeper examination of risk governance strategies in banking.
... Por primera vez -señalan Gordon et al. (2009)-se propone una forma de validar la implementación eficaz de los modelos de gestión de riesgos, considerando que en la literatura hay escasa información sobre los impactos de la ERM en las organizaciones (Gordon et al., 2009;Hoyt y Liebenberg, 2011;Power, 2009;Sutton, 2006). Gordon et al. (2009) desarrollaron el Enterprise Risk Management Index (ERMI), el cual se basa en los cuatro objetivos señalados en el marco de referencia COSO: i) estrategia: metas de alto nivel, alineadas con las de la organización y que se apoyan en la misión; ii) operaciones: uso eficaz, prolijo y eficiente de recursos de la organización; iii) informes: confiabilidad del sistema de informes de la organización; y iv) cumplimiento: cumplimiento organizacional de las leyes aplicables y regulaciones. ...
Los eventos acontecidos en los primeros años del siglo XXI, como los escándalos
financieros de Enron y WorldCom, y las crisis financieras, pusieron
en evidencia, en primer lugar, importantes deficiencias en los procesos
de control existentes y, en segundo lugar, dificultades de las empresas
para estructurar modelos robustos de gestión de riesgos. Con la entrada
en vigor de COSO ERM, ISO 31000 y la Ley Sarbanes Oxley -como principales
marcos de referencia de modelos holísticos de gestión de riesgos-, se
buscaba que las organizaciones mejoren sus capacidades para cumplir con
sus objetivos estratégicos a través de actividades que atiendan la incertidumbre
y, sobre todo, creen y retengan valor organizacional. Este artículo
tiene como objetivo revisar las investigaciones realizadas sobre la eficacia
que ha generado la gestión de riesgos en las organizaciones, realizando
una revisión de la literatura en Scopus y la Web of Science. Esta revisión
deja en evidencia que las investigaciones realizadas no son concluyentes
con respecto a los reales impactos que generan los sistemas de gestión de
riesgos y su contribución con la creación de valor e incremento de la rentabilidad
financiera. Además, muestra que existe una brecha interesante
para desarrollar futuras investigaciones, considerando que muchos de los
estudios que se han realizado tienen un especial énfasis en el sector financiero,
descuidándose otros sectores económicos igualmente importantes.
This study examines the relationship between risk culture and regulation in the insurance industry using textual analysis and machine learning. By analyzing 10‐K disclosures, we classify firms into distinct risk culture clusters and find that the risk culture of insurance firms is significantly shaped by their uncertain risk strategies, constraints in defining, implementing, and reporting risks, as well as litigious decisions and risk management practices. A temporal prediction analysis indicates that large insurers maintaining a poor risk culture trend are less likely to reverse it compared to those improving. Moreover, insurance firms show enhanced risk culture post‐Dodd–Frank Act. Our findings underscore the potential benefits of regulations aimed at monitoring and overseeing insurers' risk practices.
This paper analyses the interplay between the balanced scorecard (BSC) and enterprise risk management (ERM) by employing a longitudinal case study of a large energy corporation (Global Energy). In contrast to prior research largely focusing on the ‘why’ question of BSC-ERM integration (i.e., benefits and potential pitfalls), we shift our attention to the ‘how’ question – unpacking processes underlying BSC-ERM integration over time, and the potential difficulties experienced by organisational actors during such processes. At the heart of our empirical findings was a hierarchically arranged management control infrastructure. The BSC served as the management control anchor practice (Ahrens, 2018), which was highly visible, including at the local business unit level. ERM, in comparison, assumed the role of a subsidiary practice struggling to gain visibility and traction, especially at the local level. BSC-ERM integration efforts spurred antagonistic social relationships among different actors, with our case highlighting two key additional factors – organisational structure and common mindset – that were of importance in analysing how BSC-ERM integration played out. Whilst prior work cautions that integration between ERM and other control practices may suppress alternative and potentially useful perspectives on risk, we found no such ill effects. Instead, ERM as a subsidiary control practice significantly increased its impact in Global Energy when integrated with the more established and impactful BSC anchor practice. We also extend prior literature on management control anchor practices by showing how ERM, as the subsidiary practice, did not simply execute predefined scripts determined by the anchor practice, but substantially influenced and changed the BSC anchor practice. The literature generally assumes that the anchor practice remains stable. However, in our case, input from ERM managers and the ERM practice led to significant changes in BSC performance evaluation.
Dalam lanskap bisnis yang dinamis dan diwarnai ketidakpastian, kemampuan organisasi dalam mengidentifikasi, menganalisis, dan mengelola risiko menjadi kunci penentu keberhasilan. Buku "Sistem Informasi pada Manajemen Risiko" hadir sebagai panduan komprehensif yang mengupas tuntas peran strategis teknologi informasi dalam mengoptimalkan proses manajemen risiko.
Buku ini mengeksplorasi sinergi antara sistem informasi dan manajemen risiko, serta menyajikan pendekatan terstruktur dalam identifikasi, evaluasi, dan mitigasi risiko. Dilengkapi dengan studi kasus dan contoh nyata, buku ini memberikan wawasan praktis tentang penerapan sistem informasi untuk mendukung pengambilan keputusan yang efektif dalam menghadapi risiko dan ketidakpastian.
"Sistem Informasi pada Manajemen Risiko" menjadi bacaan esensial bagi para profesional, akademisi, dan mahasiswa yang ingin mendalami optimalisasi teknologi informasi dalam menghadapi tantangan dan peluang di era disrupsi. Buku ini tidak hanya memberikan landasan teoritis yang kuat, tetapi juga membekali pembaca dengan keterampilan praktis untuk mengelola risiko secara proaktif dan strategis.
This study aims to perform a bibliometric analysis to map the development of the enterprise risk management (ERM) field. Post-1996 publications on enterprise risk management in the Web of Science database are analyzed in this scope. Bibliometric analysis of 597 publications provides a map of keywords, authors, countries, and institutions and a framework for following this literature over 25 years. According to the results of the research, in the field of ERM, an interdisciplinary field of study that attracts the attention of not only the academic world but also the business world, there has been a decrease in the number of publications in recent years. However, studies on new and different subjects have been conducted, and academic studies in ERM have shifted from developed to developing countries. It has been observed that proximity or language similarity does not affect the cluster formed by publishing countries.
Unfortunately, enterprise risk management (ERM) activities are not high on the priority agenda of senior management in both public and private sectors. Over the years, risk management experts or internal auditors have continued to raise awareness about ERM among senior management. The purpose of this chapter is to examine the role of international standards and frameworks in the failure of ERM. Conceptual ambiguity and methodological gaps in current standards and frameworks make it difficult to implement ERM effectively. Enterprise risk management is now far from being coordinated with core management and audit functions such as strategic management, internal control, and internal audit as well as with core business functions such as procurement, production, marketing, and financing. Therefore, ERM, which aims to eliminate the unit-based silo approach of traditional risk management, adopted a function-based silo approach. In this case, focusing on managing fewer and more significant risks associated with high-level objectives, rather than all business processes of the organization, and making higher contributions to the strategy formulation phase of other corporate functions can increase the success of ERM implementation.
Machine learning (ML) has affected many sectors of the economy, and the financial sector is one of the most significant sectors affected. Credit risk modeling one of the core areas of risk management in the financial services industry is at the cusp of a revolution because ML. This essay focuses on how credit risk modeling has been affected by the use of machine learning; its uses, benefits, drawbacks, and the prospects of the course. In a qualitative approach we demonstrate how emerging machine learning methodologies improve the reliability of credit risk assessment when compared with conventional credit risk assessment models. Further, we remind the importance of data quality and ethical concerns as well as regulation limitations of applying machine learning in credit risk analysis. Several trends and potential directions for the development of credit risk assessment with the help of machine learning are revealed at the end of the essay.
Machine learning (ML) has affected many sectors of the economy, and the financial sector is one of the most significant sectors affected. Credit risk modeling one of the core areas of risk management in the financial services industry is at the cusp of a revolution because ML. This essay focuses on how credit risk modeling has been affected by the use of machine learning; its uses, benefits, drawbacks, and the prospects of the course. In a qualitative approach we demonstrate how emerging machine learning methodologies improve the reliability of credit risk assessment when compared with conventional credit risk assessment models. Further, we remind the importance of data quality and ethical concerns as well as regulation limitations of applying machine learning in credit risk analysis. Several trends and potential directions for the development of credit risk assessment with the help of machine learning are revealed at the end of the essay.
The dual role of auditors providing both assurance and advisory services raises significant ethical concerns and potential conflicts of interest that can undermine the credibility and independence of the auditing profession. This paper examines the ethical considerations associated with auditors offering advisory services to their clients, focusing on issues such as independence, objectivity, and public trust. The study explores how overlapping responsibilities may compromise auditors' ability to provide unbiased opinions and create incentives for self-interest, particularly when advisory services generate substantial revenue.
Global financial compliance requirements are integral to maintaining the stability and integrity of financial markets, fostering transparency, and mitigating risks such as money laundering, fraud, and corruption. This review explores the evolving landscape of global financial regulations, including frameworks like Basel III, AML/CFT standards, GDPR, and FATCA, and examines the cost of compliance for financial institutions in terms of resources, technology, and operational adjustments. Furthermore, the paper highlights the consequences of non-compliance, such as financial penalties, reputational damage, and operational disruptions. Through an analysis of case studies and trends, this review underscores the necessity for robust compliance mechanisms, the role of technology in streamlining adherence, and the strategic importance of aligning with international standards to minimize risks and foster trust in financial ecosystems. The findings emphasize that while compliance can be resource-intensive, the cost of non-compliance often far outweighs these investments, reinforcing the need for proactive approaches to regulatory adherence.
Mergers and acquisitions (M&A) transactions present significant opportunities for organizational growth and market expansion, but they also carry substantial risks that can impede the anticipated benefits. Among these risks, cultural integration and financial risks are particularly challenging and often overlooked. This paper explores the key factors involved in identifying and mitigating these risks, with a focus on cultural misalignment, financial due diligence, and post-merger integration. Cultural integration risks arise when differing organizational values, leadership styles, and employee expectations clash, leading to reduced employee morale, decreased productivity, and potential turnover. Financial risks, such as overvaluation, debt mismanagement, and integration costs, can undermine the economic advantages of an M&A transaction. Using a combination of machine learning and statistical methods, the study analyzes historical M&A cases to predict potential risks and suggest mitigation strategies. Key recommendations include conducting thorough cultural assessments, improving financial forecasting, and employing change management frameworks to facilitate smoother integration processes. By effectively identifying and addressing these risks, organizations can enhance the likelihood of a successful merger or acquisition, thereby maximizing the long-term value of the transaction.
The application of a risk-based approach (RBA) to managing financial crime risk has been a long-standing requirement and rhetoric of the Financial Action Task Force (FATF), filtering into national legislative requirements, regulatory expectations, and the private sector management of financial crime risk. The RBA concept can be deconstructed at a micro level by analysing how banks—a subset of regulated firms—define, manage, and attempt to mitigate financial crime(s) risk(s) in practice. The authors conclude that there are some serious challenges for the conceptualisation, and variations in the application, of the RBA from an operational perspective. There are also limitations for intelligence gathering and of the measurement of ‘effectiveness’ for financial crime control, where risk assessment methodologies informing the RBA differ between organisations. Given that the outputs of these RBAs are relied upon so heavily by national Financial Intelligence Units (FIUs) and by Regulatory Supervisors, there is a need for increased transparency in such methodologies. An understanding of the practical challenges and limitations faced by regulated entities in their interpretation and application of the RBA is critical if there is a legitimate desire to improve, and to make more consistent, private sector participation within the financial crime control landscape.
This comprehensive study delves into the intricate examination of the intricate interplay between risk management culture, process, and competitive advantage in Senegal’s construction industry. By utilizing data from a diverse pool of 280 construction companies, the study employed quantitative research methods, specifically utilizing Structural Equation Modeling (SEM) with Smart PLS as the analytical tool. The results shed light on the significant contributions of risk management culture and process to competitive advantage, while also emphasizing the crucial role of employee engagement as a mediator in this dynamic relationship. These findings highlight the importance of fostering a risk-aware culture, implementing robust risk management processes, and nurturing employee engagement to strengthen competitive advantage in Senegal’s construction sector. Moreover, this study enhances the existing literature on risk management, employee engagement, and competitive advantage, offering valuable implications for industry managers and policymakers navigating the complexities of the construction sector in Senegal and similar contexts.
Innovative practices are not often associated with local authorities, and certainly not very small public bodies (villages, schools, towns), but in the USA the success of local government self-insurance pools flies in the face of that notion. Over 75,000 (out of a total of 84,000) local bodies have come to participate in pools and—indeed—they were collectively/collaboratively responsible for their creation. Starting in 1974, these pools have provided risk financing across most traditional lines of insurance—property, liability, life, and a range of specialty lines. In fact, reinsurance pools have also emerged; pools of pools it might be said. Perhaps most significantly, many of these pools have extended their activities well beyond risk financing and have become what might be called risk management pools. As such, the real innovation may not just be seen in providing a myriad of risk coverages to small public bodies but to providing relatively advanced risk management programs to thousands of these bodies; bodies that otherwise simply would not have the capacity to take on these activities themselves. In achieving this range of sophistication, the case is easily made that pooling is the most important example of public sector innovation in USA local governments.
The integration of risk into management control has recently received increased attention in the management accounting and control literature. Much of this research has focused on the organizational and individual actor level. However, some studies suggest that the integration of risk into the organizational control package may equally be influenced by forces operating at other levels of analysis– including the economic and political level and the organizational field level. In this guest editorial for the special issue on “Courageous Risk Governance: Enabling Resilience, Autonomy, and New Thinking,” I therefore discuss how our collective understanding of the integration of risk into management control could be enhanced by research at multiple levels of analysis. The papers included in this special issue show that when this integration is successfully managed, organizations can achieve valuable outcomes, such as increased resilience. For both practitioners and academics, future research on such integration therefore seems fruitful and necessary. This article provides ideas for particularly relevant questions about this integration and for theories that can guide such research.
ABSTRACT: Thevetia peruviana is an evergreen shrub in the family Apocynanceae.
It is extremely poisonous in nature, with the kernels being the most dangerous part.
The shrub or small tree is with yellow or orange-yellow trumpet-like flowers and deep
red/black fruit that resembles a Chinese lucky nut. The cardiac glycosides in yellow
oleander are the active ingredients. The milky sap of T. peruviana includes a substance
called thevetin. Thevetin is a potent toxin for the heart. Thevotoxin is similar to the
glycosides of digitalis in action and is less poisonous than thevetin. Strychnine-like
effects are shared by cerberin. Several child deaths have been reported by this species.
Burning and tingling in the mouth and tongue, dryness of the throat, vomiting,
diarrhoea, headache, dizziness, dilated pupils, irregular heartbeat that resembles the
symptoms of digitalis. Sleepiness, collapse, coma, and death are the possible indicators.
Tetanic convulsions are occasionally observed. The entire plant is poisonous, and
ingestion of its kernels and leaves commonly occurs in suicidal and homicidal
poisoning. Women in certain parts of India use the root and seeds of yellow oleander
to commit suicide and induce abortion. Cattle poisoning occurs when crushed seeds
are mixed with fodder and fed to the animal. Yellow Oleander poisoning cases are
referred to FSLs for identification and analysis. Phytochemical, Pharmacological,
Morphological and Molecular studies on this plant have been reviewed to prepare a
comprehensive reference document for forensic scientists.
Keywords: Digitalis, Glycosides, Homicide, Kernels, Suicide.
In the Tavistock tradition, we understand an organization by first identifying its primary task. We ask, what is this organization set up to do, how is it organized to accomplish this objective, and what unconscious dynamics limit or distort its members' ability to do their work? This approach while powerful, does not help us understand organizations that live at strategic junctures in their life cycles. In these situations, the task is to choose a task. We need a conceptual framework to help us understand the psychodynamics of organizing and deciding in these situations. The following article develops the concept of the "primary risk' to explain how organizations behave in these situations. It links the primary risk to the psychoanalytic idea of ambivalence and the gestalt idea of the figure/ground relationship. It draws on case material to illuminate its concepts.
We here examine the introduction of appraisal for senior medical professionals. Our recent qualitative field research found four main experiences of appraisal (developmental, disappointed reflection, defensive assessment and cynical dismissal of appraisal as a waste of time), which we developed into a typology. We argue many professionals `play tick-box games' to give the impression of auditable practice while continuing to practise in a traditional way. We develop existing theory on the `audit society', social defences and `mock bureaucracy' to explain interrelating defences which occur in appraisal as a reaction to the risks and conflict experienced in professional regulation.
The World Trade Center terrorist attacks of September 11 raise a set of challenges that organizations face in dealing with low-probability events that have catastrophic consequences. More specifically, there are certain bad events that can occur only once. Death is the clearest example: an individual's death is irreversible and unrepeatable. With respect to firm behaviour, bankruptcy is the obvious analogue. This chapter explores the impact that the possibility of an extreme event, such as bankruptcy, has on the propensity of different parts of an organization to take risks. A key point to emphasize at the outset is that the economic incentive for any division in an organization to invest in risk-reduction measures depends on how it expects the other divisions to behave in this respect. Consider Division 1. If it thinks that the other divisions will not invest in protection, this reduces Division 1's incentive to do so. However, should Division 1 believe that the others are taking appropriate steps to mitigate their risks, it may be best for Division 1 to do so as well. In other words there may be situations where no one invests in protection, even though all divisions would be better off if they had incurred this cost.
The sociology of markets has been one of the most vibrant fields in sociology in the past 25 years. There is a great deal of agreement that markets are social structures characterized by extensive social relationships between firms, workers, suppliers, customers, and governments. But, like in many sociological literatures, the theory camps that have formed often seem to speak by each other. We show that some of the disagreement between theory camps is due to differences in conceptual language, and other disagreements stem from the fact that theory camps ignore the concepts in other theory camps, thereby making their theories less complete. We end by considering deeper controversies in the literature that seem open both to new conceptualization and further empirical research.
Introduction: Explaining global order In the modern world it is conspicuously easy to communicate and interact with people all over the globe. Communication and interaction are facilitated by common systems of distinction and by our ability to predict the behavior of our counterparts. An air ticket can be used all over the globe because there is agreement on the meaning of the series of codes printed on it, and because there are common classification systems used to describe organizations such as airlines and individuals such as pilots; furthermore we expect airlines and pilots to act in a similar manner wherever we encounter them. Because it is easy to predict the behavior of people and organizations, it is possible to interact with them with little knowledge about their personal traits or histories. To many modern observers, this high degree of order is remarkable, and has played a significant role in fostering the popularity of the concept of globalization. For most of the twentieth century, scholars have referred to the nation-state as a primary source of order, although within restricted territories, through first a common organization, the state; and second a common culture, the nation. Modern states constitute one of our clearest examples of complete, strong and complex organizations (Ahrne 1998) and cultures are often assumed to follow state borders (Hofstede 1980). © Cambridge University Press 2006 and Cambridge University Press, 2009.
Both risk and uncertainty are neo-liberal concepts, which can be viewed as complementary techniques for governing diverse aspects of life, rather than natural states of things. This new book examines the way these constructs govern the production of wealth through 'uncertain' speculation and 'calculable' investment formulae.
Recurring disappointment with rates of growth and a growing frustration with the lack of effect after pouring aid and investment money into developing countries for several decades directed the attention of developmentalists to political conditions. By the mid-1990s it was clear that corruption, mismanagement, and capricious bureaucracies were standing in the way of modernization in developing countries. Thus, even before the muchpublicized cases of corporate misconduct in the United States and Europe, corruption emerged as a worldwide concern, as did its curbing as a social policy subject to globalization.
Public inquiries into behavior connected with three major disasters are examined and classified to study the conditions under which large-scale intelligence failures develop. Common causal features are rigidities in institutional beliefs, distracting decoy phenomena, neglect of outside complaints, multiple information-handling difficulties, exacerbation of the hazards by strangers, failure to comply with regulations, and a tendency to minimize emergent danger. Such features form part of the incubation stage in a sequence of disaster development, accumulating unnoticed until a precipitating event leads to the onset of the disaster and a degree of cultural collapse. Recommendations following public inquiries are seen as part of a process of cultural readjustment after a disaster, allowing the ill-structured problem which led to the failure to be absorbed into the culture in a well-structured form. The sequence model of intelligence failure presented and the discussion of cases are intended to offer a paradigm for discussion of less tragic, but equally important organizational and interorganizational failures of foresight.
The use of risk management as a response to ‘strategic’ organizational uncertainties is investigated. The deconstruction of uncertainties to rationalized probabilities is argued to be symptomatic of a specific conceptualization of problems as ‘tame’, a narrow epistemology that fails to account fully for organizational experience. By introducing ‘messes’ and ‘wicked problems’, a new mode of rhetorical, allegorical risk management is argued for. Insights from Machiavelli and psychoanalysis provide frameworks by which this can be achieved.
Using two techniques, the authors collected replicated data on red cell osmotic fragility of normal Jersey cows having different haemoglobin genotypes. The data were tested against several theoretical distributions. The logistic sigmoid was chosen as a model, the concentration of added salt solution at which 50% haemolysis occurred was taken as an index. Red cells of haemoglobin genotype BB were more fragile than AA, with AB intermediate.
In the pages of the daily financial press, 'shareholder value' is a loose rhetoric. For business consultants who sell financial metrics and implementation, shareholder value is also a product and a promise that purposive management action will be rewarded. This paper begins by considering the consultant's promise and the more guarded academic responses. It then presents empirics on micro performance and the meso limits to shareholder value and argues that most corporate managements cannot easily deliver what consultants promise and the capital markets demand. The paper ends by taking a broader view of value-based management as part of a process of financialization. If the results are contradictory and disappointing, a persistent gap between expectations and outcomes can nevertheless drive management behaviours, which change the world.
Sociologists use negative feedback loop systems to explain identity processes, interpersonal behavior, crowd behavior, organizational behavior, social relationships, and the behavior of political systems. Control system models help us to understand how actors enact social roles with enough stability to preserve institutional arrangements, while still demonstrating remarkable creativity in unusual circumstances. These theories take us away from an oversocialized view of the actor, without relegating us to exclusive reliance on grounded theory. They provide a foundation for several generative theories of adaptive, goal-seeking behavior on the part of social actors and institutions. This chapter begins by tracing the history of control theorizing in sociology, then describes several contemporary theories that rely on control imagery, reviews the empirical support for these theories, describes some of their significant points of overlap and departure, and examines some of the key tested and untested implications of a control system approach in sociology.
The Motivation Crowding Effect suggests that external intervention via monetary incentives or punishments may undermine, and under different identifiable conditions strengthen, intrinsic motivation. As of today, the theoretical possibility of motivation crowding has been the main subject of discussion among economists. This study demonstrates that the effect is also of empirical relevance. There exist a large number of studies, offering empirical evidence in support of the existence of crowding–out and crowding–in. The study is based on circumstantial evidence, laboratory studies by both psychologists and economists, as well as field research by econometric studies. The pieces of evidence presented refer to a wide variety of areas of the economy and society and have been collected for many different countries and periods of time. Crowding effects thus are an empirically relevant phenomenon, which can, in specific cases, even dominate the traditional relative price effect.
This paper explores the relation between decision theoretic conceptions of risk and the conceptions held by executives. It considers recent studies of risk attitudes and behavior among managers against the background of conceptions of risk derived from theories of choice. We conclude that managers take risks and exhibit risk preferences, but the processes that generate those observables are somewhat removed from the classical processes of choosing from among alternative actions in terms of the mean (expected value) and variance (risk) of the probability distributions over possible outcomes. We identify three major ways in which the conceptions of risk and risk taking held by these managers lead to orientations to risk that are different from what might be expected from a decision theory perspective: Managers are quite insensitive to estimates of the probabilities of possible outcomes; their decisions are particularly affected by the way their attention is focused on critical performance targets; and they make a sharp distinction between taking risks and gambling. These differences, along with closely related observations drawn from other studies of individual and organizational choice, indicate that the behavioral phenomenon of risk taking in organizational settings will be imperfectly understood within a classical conception of risk.
Enterprise risk management (ERM) has recently emerged as a widespread practice in financial institutions. It has been increasingly codified and encrypted into regulatory, corporate governance and organizational management blueprints. A burgeoning literature of regulatory and practitioner texts is indicative of the apparent diversity of ambitions, objectives and techniques that constitute the ERM agenda. Making sense of these developments is a challenge. This paper presents field-based evidence from two large banking organizations suggesting that systematic variations in ERM practices exist in the financial services industry. The cases illustrate four risk management ideal types and show how they form the ‘risk management mix’ in a given organization. Further, drawing on the literature of the roles and uses of management control systems (MCS), the paper explores how ERM achieved organizational significance in the studied settings. The findings are indicative of the current co-existence of alternative models of ERM. In particular, two types of ERM models are postulated: one driven by a strong shareholder value imperative (ERM by the numbers), the other corresponding to the demands of the risk-based internal control imperative (holistic ERM). This paper explains the differences in the two risk management mixes pointing towards alternative logics of calculation [Power, M.K., 2007. Organized Uncertainty—Designing a World of Risk Management. Oxford University Press, Oxford], which I conceptualise and describe as different calculative cultures. The study suggests that calculative cultures, which in these cases shaped managerial predilections towards ERM practices, are relevant, albeit so far neglected, constituents of the fit between MCS and organizational contexts.
Financial economics combines a high degree of theoretical abstraction and formality with considerable empirical uncertainty and strong connections to financial institutions and employers. This unusual combination is the product of academic expansion in the leading U.S. post graduate business schools and their attempt to acquire intellectual legitimacy by encouraging scientific research, on the one hand, and of changes in the organization of U.S. financial markets, especially of investment analysis and management, on the other hand. This paper discusses the dominant characteristics of financial economics as an intellectual field and how these contextual factors shaped its emergence.
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Since the mid-1990s risk management has undergone a dramatic expansion in its reach and significance, being transformed from an aspect of management control to become a benchmark of good governance for banks, hospitals, schools, charities, and many other organizations. Numerous standards for risk management practice have been produced by a variety of transnational organizations. While these many designs and blueprints are accompanied by ideals of enterprise, value production, and good governance, it is argued that the rise of risk management has also coincided with an intensification of auditing and control processes. The legalization and bureacratization of organizational life has increased because risk management has created new demands for proof and evidence of action. In turn, these demands have generated new risks to reputation. In short, this important book traces the rise of the managerial concept of risk and the different logics and values which underpin it, showing that it has much less to do with real dangers and opportunities than might be thought, and more to do with organizational accountability and legitimacy.
In boom times, it is easy for managers to forget about risk. And not just financial risk, but organizational and operational risk as well. Now there's the risk exposure calculator, a new tool that will help managers determine exactly where and how much internal risk is mounting in their companies. The risk calculator is divided into three parts: The first set of "keys" alerts managers to the pressures that come from growth. Now that the company has taken off, are employees feeling increased pressure to perform? Is the company's infrastructure becoming overloaded? And are more new employees coming on board as the company rushes to fill positions? If the answer is yes to any one of those questions, then risk may be rising to dangerous levels. The second set of keys on the calculator highlights pressures that arise from corporate culture. Are too many rewards being given for entrepreneurial risk taking? Are executives becoming so resistant to bad news that no one feels comfortable alerting them to problems? And is the company's level of internal competition so high that employees see promotion as a zero-sum game? The final set of pressures, the author says, revolves around information management. When calculating these pressures, managers should ask themselves, what was the company's complexity, volume, and velocity of information a year ago? Have they risen? By how much? How much of the time am I doing the work that a computer system should be doing? High pressure on many or all of these points should set off alarm bells for managers. To control risk, managers have four levers of control at their disposal that will show them where they need to make organizational adjustments.
Field observations of two audit engagements are used to interpret auditing as a ritual which transforms the financial statements of corporate management from an inherently untrustworthy state into a form that the auditors and the public can be comfortable with. The analysis draws on Collins' theory of interaction ritual chains (American Journal of Sociology, 1981, pp. 984–1014) to create an interpretative theory of auditing which offers insights into both the micro-level interactions within the audit team and the macro-level role of auditing in the economic order.
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