The Appeal of the Appropriate: Accounting, Risk Management, and the Competition for the Supply of Control Systems


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The Appeal of the Appropriate: Accounting, Risk Management, and the Competition for the Supply of Control Systems
Mikes A.
Institution details
Harvard Business School (revised January 2013)
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Working paper
How do certain risk measurements in organizations come to be seen as more reliable and acceptable than others?
Taking a multiple-control perspective, I investigate the aftermath of a control debacle at a financial services company (MultiBank), focusing on its insurance division (EurInsurance), which suffered large losses in the European insurance crisis of 2002-2003. At MultiBank, the insurance crisis opened up a field of contestability in which new control agents got the opportunity to become implicated in divisional control. The struggle for custody over divisional control was a micropolitical process of interprofessional competition, played out between accountants and risk controllers who promoted conflicting measures of the key strategic uncertainty, EurInsurance’s capital adequacy. The control agents engaged in credentializing strategies (Power, 1992); they mobilized and drew on different cultural resources to construct the reliability of their techniques and to discredit and “minoritize” the others’. This credibility contest was won by the accountants who (unlike their opponents) were able to demonstrate the “institutional appropriateness” of their controls. Importantly, the fate of the competing control systems was contingent, not on how well their technologies addressed the problem of EurInsurance’s capital adequacy, but rather on the controllers’ capacity to generate top managerial acceptance and a widespread consensus among both internal and external stakeholders. The outcome of this type of professional competition is not determined by claims about representing the underlying economic reality, but by claims about representing those who care about it most. While competing controller groups have been observed to appeal to top management’s logic of functionalism, this paper argues that, in certain circumstances, controller groups may successfully draw on the logic of appropriateness as they supply new control systems.

Management Control Systems, Multiple C ontrol Systems, Professional Competition, Performance Measurement, Risk Management , Risk Measurement, Financialization of Accounting, Institutional Logics, Fair Value Accounting, Insurance, Banking
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18/08/2014 15:49
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20/08/2019 14:32
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