Reconciling risk as threat and opportunity: The social construction of risk in boardrooms

Board directing is a continuous process of risk analysis and control in response to the duality of risk as threat and opportunity. Judgments are made and remade to simultaneously reduce the potential for damaging threats (e.g., fraud, reputation damage), while exploiting opportunities (e.g., new pro...

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Published inRisk analysis Vol. 44; no. 8; pp. 1959 - 1976
Main Authors Bryce, Cormac, Ashby, Simon, Ring, Patrick
Format Journal Article
LanguageEnglish
Published United States Blackwell Publishing Ltd 01.08.2024
Subjects
Acquisitions & mergers
board directing
Damage
Directing
duality of risk
Evaluation
Fraud
governance
Governing Board
Humans
Mergers
Nonexecutive directors
Organizations
Product development
Risk
Risk analysis
Risk assessment
Risk Assessment - methods
Risk Management
Social construction
Testimony
Threat evaluation
Threats
board directing
risk management
duality of risk
governance
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Summary:Board directing is a continuous process of risk analysis and control in response to the duality of risk as threat and opportunity. Judgments are made and remade to simultaneously reduce the potential for damaging threats (e.g., fraud, reputation damage), while exploiting opportunities (e.g., new product development, mergers and acquisitions). Adopting an institutional logics approach, we explore this process of risk analysis and control through the varied subject identities (e.g., directorial roles), risk management practices (the procedures and tools used to identify, assess, and control risk), and risk objects (the product of risk identification, assessment, and control, e.g., a risk matrix or register) of boards. We argue that the contingent interaction between these identities, practices, and objects inform the “risk logic” of a board, which may draw attention to the notion of risk as threat, risk as opportunity, or both threat and opportunity. Using the testimony of 30 executive and nonexecutive directors that represent 62 companies from a range of public, private, and third‐sector organizations, we contribute to the literature on the microfoundations of risk analysis in organizations by shining a light on how board directors understand, assess, control, and ultimately govern risk in organizations.
Bibliography:Funding information
The authors wish it to be known that, in their opinion, all authors should be regarded as joint first authors. The order of authors provided in this article was determined by measuring the distance from the grave of the founding father of one of the most important theorems within the risk analysis field (Reverend Thomas Bayes—Bunhill Fields, London), to that of each of the coauthors as would be travelled by bicycle on the day in which final author order was discussed. The results were as follows: Cormac Bryce (750 m), Simon Ashby (411 km), Patrick Ring (770 km). Cofirst authors can prioritize their names when adding this article to their academic CV.
Association of Chartered Certified Accountants (ACCA)
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SourceType-Scholarly Journals-1
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ISSN:0272-4332
1539-6924
1539-6924
DOI:10.1111/risa.14275