Incorporating Risk Considerations into Planning and Control Systems: The Influence of Risk Management Value Creation Objectives
Forthcoming in Philip Linsley and Margaret Woods (eds.), The Routledge Companion to Accounting and Risk, London: Routledge, 2016
37 Pages Posted: 5 Apr 2016
Date Written: April 5, 2016
Using data on a broad international sample of listed, private, and non-profit entities, we explore the influence of risk management value creation objectives on the incorporation of risk considerations in planning and control systems. The combination of detailed survey responses and archival data allow us to provide evidence on the adoption of a wide variety of risk-focused planning and control practices, to examine how these practices vary with risk management objectives, and to shed light on the performance implications of risk-focused planning and control practices and risk management objectives. Our results highlight the important influence that risk management value creation objectives can have on the use and benefits from risk-focused planning and control practices. Organizations that primarily focus on minimizing risks within budget or reducing the total cost of risks tend to make less use of these practices, have higher stock price volatility, and achieve lower firm value than those that have taken greater steps to holistically consider both the upsides and downsides of risk.
Keywords: Enterprise risk management, ERM, Planning and control system design
JEL Classification: G31, G32, L1, L2, L3, M10, M41
Suggested Citation: Suggested Citation