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

See all articles by Christopher D. Ittner

Christopher D. Ittner

University of Pennsylvania - Accounting Department

Thomas Keusch

INSEAD

Date Written: April 5, 2016

Abstract

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

Ittner, Christopher D. and Keusch, Thomas, Incorporating Risk Considerations into Planning and Control Systems: The Influence of Risk Management Value Creation Objectives (April 5, 2016). Forthcoming in Philip Linsley and Margaret Woods (eds.), The Routledge Companion to Accounting and Risk, London: Routledge, 2016. Available at SSRN: https://ssrn.com/abstract=2759308

Christopher D. Ittner (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7786 (Phone)
215-573-2054 (Fax)

Thomas Keusch

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

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