Managing risk in operations : a multi-level study
Ritchie, Ross Andrew
This research explores the management of risk in operations. It explores the different structures influencing the treatment of risk and the influence on managerial risk taking behaviours. There is limited understanding within the extant literature of the different treatment strategies for risk in operations and what influences selection of treatment strategy. This research employs an abductive approach iterating between the theoretical and empirical. There are four levels of analysis: the firm, the function, the group and the individual. The research was conducted in two European Energy companies. The research found that there is a complex interaction between organizational structures and individual perceptions in managing risk. Corporate risk structures have limited influence on the selection of risk treatments. The specification of business function (service or asset focus) informs the process of risk management and use of systems. Use of systems and valuation techniques underpin the risk prioritization process and specifically the assessment of risk. There is an order of decision influences that reflects the Levers of Control (Simons, 1995; 1998): Risk treatments are prohibited by boundary systems. Secondly, individual’s beliefs influence positive selection of treatment, and third where a treatment has not been selected through beliefs, the performance system is consulted. The performance system is most likely to influence selection of risk acceptance or risk mitigation. It is found that classification of risk has more than a semantic influence on perception and risk treatment; it can prohibit uses of certain treatments and inform priority. Understanding of the decision process matures and increases in complexity in senior managers. It is found that the performance system has influences on manager’s beliefs and in the long term, reflecting vision and mission the implementation of boundary conditions.
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