Enterprise Risk Management, 2nd Edition

CHAPTER 13Toolmaking in Risk Management: The Case of Core Values and the Formalization of “Risk Appetite”

 

ANETTE MIKES

Associate Professor of Accounting, University of Oxford

 

SUMMARY

This chapter explores the latest reach of the ever-expanding discipline of risk management: the inclusion of core values in the practice of risk management. Based on my study of the emergence and formalization of a new risk-management tool—the risk appetite radar (RAR)—in two Canadian high-reliability organizations, I describe two risk managers' journeys toward operationalizing and formalizing risk appetite and making multiple values at risk count in decision making. The observed tools and related practices achieved local stabilization, despite the general confusion in the wider environment as to what exactly “risk appetite” entails. The chapter contributes to studies of “the risk management of everything” and, in particular, on how new risk management practices begin. It highlights the role of discovery in toolmaking: the partly deliberative, partly tentative processes by which risk managers feel their way toward “formalization that works” (Stinchcombe 2001). The two cases of risk-appetite object formation and stabilization suggest alternative ways to cast core values as management objects: one assumes the fixation of corporate values, while the other allows for the dynamic, collibrative nature of value prioritization in corporate life.

INTRODUCTION

In the past two decades, the concept of ...