Spatial Distance and Risk Category Effects in Enterprise Risk Management Practice

Forthcoming, Spatial Distance and Risk Category Effects in Enterprise Risk Management Practice. Journal of Management Accounting Research https://doi.org/10.2308/JMAR-2021-016

Posted: 25 May 2022

See all articles by Dennis Fehrenbacher

Dennis Fehrenbacher

Institute of Accounting, Control and Auditing (ACA), University of St.Gallen; Department of Accounting, Monash Business School, Monash University

Steve G. Sutton

University of Central Florida; NHH Norwegian School of Economics

Martin Weisner

University of Melbourne - Department of Accounting

Date Written: April 21, 2022

Abstract

Research suggests corporate board members would like to receive more information about how risk probabilities are estimated. We examine how spatial distance from a risk assessment target and risk category (operational vs. non-operational risk factors) affects decision-makers’ assessment of the probability that a given risk will materialize. Results from an experiment involving 141 risk managers provide some support for spatial distance effects. Importantly, we find the difference in decision-makers’ probability assessments between operational and non-operational risk factors is greater when assessing a proximate rather than a remote target. We contribute to the accounting literature by demonstrating how spatial distance affects probability judgments. This is important as probability judgments are not only prevalent in managerial decision-making contexts but also in audit, tax, and other settings where decision-targets may be spatially removed from the decision-maker.

Keywords: enterprise risk management (ERM), probability assessment, risk category, risk disclosure, risk register, risk database

JEL Classification: M41, M42

Suggested Citation

Fehrenbacher, Dennis and Sutton, Steve G. and Sutton, Steve G. and Weisner, Martin, Spatial Distance and Risk Category Effects in Enterprise Risk Management Practice (April 21, 2022). Forthcoming, Spatial Distance and Risk Category Effects in Enterprise Risk Management Practice. Journal of Management Accounting Research https://doi.org/10.2308/JMAR-2021-016 , Available at SSRN: https://ssrn.com/abstract=4101976

Dennis Fehrenbacher

Institute of Accounting, Control and Auditing (ACA), University of St.Gallen ( email )

St.Gallen, 9000
Switzerland

Department of Accounting, Monash Business School, Monash University ( email )

H3.43, Building H, Level 3
Monash University Caulfiled
Melbourne, VIC 3145
Australia

Steve G. Sutton

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816
United States

NHH Norwegian School of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway

Martin Weisner (Contact Author)

University of Melbourne - Department of Accounting ( email )

Victoria
Melbourne, Victoria 3010 3010
Australia

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