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On the Need for Rethinking Current Practice that Highlights Goal Achievement Risk in an Enterprise Context

Author

Listed:
  • Eyvind Aven
  • Terje Aven

Abstract

This article addresses the issue of how performance and risk management can complement each other in order to enhance the management of an enterprise. Often, we see that risk management focuses on goal achievements and not the enterprise risk related to its activities in the value chain. The statement “no goal, no risk” is a common misconception. The main aim of the article is to present a normative model for describing the links between performance and risk, and to use this model to give recommendations on how to best structure and plan the management of an enterprise in situations involving risk and uncertainties. The model, which has several novel features, is based on the interaction between different types of risk management (enterprise risk management, task risk management, and personal risk management) and a structure where the enterprise risk management overrules both the task and personal risk management. To illustrate the model we use the metaphor of a ship, where the ship is loaded with cash‐generating activities and has a direction over time determined by the overall strategic objectives. Compared to the current enterprise risk management practice, the model and related analysis are founded on a new perspective on risk, highlighting knowledge and uncertainties beyond probabilities.

Suggested Citation

  • Eyvind Aven & Terje Aven, 2015. "On the Need for Rethinking Current Practice that Highlights Goal Achievement Risk in an Enterprise Context," Risk Analysis, John Wiley & Sons, vol. 35(9), pages 1706-1716, September.
    • Handle: RePEc:wly:riskan:v:35:y:2015:i:9:p:1706-1716
    DOI: 10.1111/risa.12375
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    References listed on IDEAS

    as
    1. Terje Aven, 2013. "On the Meaning and Use of the Risk Appetite Concept," Risk Analysis, John Wiley & Sons, vol. 33(3), pages 462-468, March.
    2. Eyvind Aven & Terje Aven, 2011. "On how to understand and express enterprise risk," International Journal of Business Continuity and Risk Management, Inderscience Enterprises Ltd, vol. 2(1), pages 20-34.
    3. Aven, Terje, 2013. "Practical implications of the new risk perspectives," Reliability Engineering and System Safety, Elsevier, vol. 115(C), pages 136-145.
    4. W. Edwards Deming, 2000. "The New Economics for Industry, Government, Education, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262541165, December.
    5. M. Elisabeth Paté-Cornell & Robin L. Dillon, 2006. "The Respective Roles of Risk and Decision Analyses in Decision Support," Decision Analysis, INFORMS, vol. 3(4), pages 220-232, December.
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    Cited by:

    1. Marshall, Alasdair & Ojiako, Udechukwu & Wang, Victoria & Lin, Fenfang & Chipulu, Maxwell, 2019. "Forecasting unknown-unknowns by boosting the risk radar within the risk intelligent organisation," International Journal of Forecasting, Elsevier, vol. 35(2), pages 644-658.
    2. Aven, Terje & Ylönen, Marja, 2019. "The strong power of standards in the safety and risk fields: A threat to proper developments of these fields?," Reliability Engineering and System Safety, Elsevier, vol. 189(C), pages 279-286.

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