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The risk management of nothing

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  • Power, Michael
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    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Accounting, Organizations and Society.

    Volume (Year): 34 (2009)
    Issue (Month): 6-7 (August)
    Pages: 849-855

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    Handle: RePEc:eee:aosoci:v:34:y:2009:i:6-7:p:849-855

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    Web page: http://www.elsevier.com/locate/aos

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    1. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    2. Pentland, Brian T., 1993. "Getting comfortable with the numbers: Auditing and the micro-production of macro-order," Accounting, Organizations and Society, Elsevier, vol. 18(7-8), pages 605-620.
    3. James G. March & Zur Shapira, 1987. "Managerial Perspectives on Risk and Risk Taking," Management Science, INFORMS, vol. 33(11), pages 1404-1418, November.
    4. Whitley, Richard, 1986. "The transformation of business finance into financial economics: The roles of academic expansion and changes in U.S. capital markets," Accounting, Organizations and Society, Elsevier, vol. 11(2), pages 171-192, March.
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    Cited by:
    1. Williams, James W., 2013. "Regulatory technologies, risky subjects, and financial boundaries: Governing ‘fraud’ in the financial markets," Accounting, Organizations and Society, Elsevier, vol. 38(6), pages 544-558.
    2. Blome, Constantin & Schoenherr, Tobias, 2011. "Supply chain risk management in financial crises--A multiple case-study approach," International Journal of Production Economics, Elsevier, vol. 134(1), pages 43-57, November.
    3. Jupe, Robert, 2012. "The privatization of British Energy: Risk transfer and the state," Accounting, Organizations and Society, Elsevier, vol. 37(2), pages 116-129.
    4. Arena, Marika & Arnaboldi, Michela & Azzone, Giovanni, 2010. "The organizational dynamics of Enterprise Risk Management," Accounting, Organizations and Society, Elsevier, vol. 35(7), pages 659-675, October.
    5. Fischer, Michael Daniel & Ferlie, Ewan, 2013. "Resisting hybridisation between modes of clinical risk management: Contradiction, contest, and the production of intractable conflict," Accounting, Organizations and Society, Elsevier, vol. 38(1), pages 30-49.
    6. Power, Michael, 2013. "The apparatus of fraud risk," Accounting, Organizations and Society, Elsevier, vol. 38(6), pages 525-543.

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