The Never-Ending Appeal of Risk Management: An Alternative Research Agenda

• Main Authors: LIM, Chu Yeong, Humphrey, Christopher
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2011
• Subjects: Accounting; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/905
• Institution: Singapore Management University

The global financial crisis has generated a number of calls for better risk management as a way of preventing the risk exposures and strategic management failings that stimulated the dramatic downturn in corporate and economic performance of recent years. Reference to the risk management literature over the last two to three decades, however, demonstrates that the desire for risk management to function in a more holistic fashion, to go beyond a dominant metrics and compliance attitude, is nothing new. This paper argues that the risk management literature needs to give more attention to the risk imbalances among key actors involved in processes of corporate risk management. If not properly considered, such imbalances are capable of thwarting many proposed risk management solutions. The primary sources of risk imbalances come from knowledge and information gaps, nearness to business and markets, organizational importance (front versus back office) and position in the organizational hierarchy, affiliation to regulatory requirements and access to resources. The paper uses four illustrative vignettes (including trader-accountant interactions, value-at-risk (VAR) measures, notions of auditor scepticism, and credit rating practices) to explore the nature and significance of such risk imbalances. It then goes on to consider the extent to which proposed reforms and risk management technical advances address, ignore or, potentially, worsen risk imbalances. The paper concludes with an assessment of the implications for future research in the field of risk management and the extent to which the pursuit of more holistic forms of risk management is dependent on a holistic turn in risk management research.