The Role of Roles in Risk Management Change: The Case of an Italian Bank

Abstract

This paper explores the role of roles (i.e. groups of actors characterised by the same functional tasks within an organisation), and of their interactions, within processes of change in risk management (RM). By combining insights from the literature on RM and from institutional studies, this paper suggests that change in RM can be interpreted as a process that involves both enabling and precipitating dynamics [Greenwood, R., & Hinings, C. R. (1996). Understanding radical organizational change: Bringing together the old and the new institutionalism. The Academy of Management Review, 21, 1022–1054. doi:10.5465/AMR.1996.9704071862] between different roles. Aiming to address these dynamics empirically, we rely on a longitudinal case study of an Italian bank. The study shows that the interactions between roles were dependent on their respective specific interests, the different institutional templates they supported, and the shifts in power for control over relevant information. These dynamics both affected and were affected by the change in the template-in-use within the bank and allowed a sort of RM ideal (i.e. the search for more RM) to persist over evolving templates.

Acknowledgements

The authors would like to gratefully acknowledge the helpful comments and suggestions provided on earlier drafts of the paper by the associate editor, an anonymous reviewer, the participants at the European Accounting Association conference (2012) and the colleagues from the Department of Business and Law, University of Siena.

Supplemental Data and Research Materials

Supplemental data for this article can be accessed on the Taylor & Francis website, doi: 10.1080/09638180.2014.990475.

Notes

¹Banca Valle is a pseudonym used for reasons of confidentiality.

²Below, we will generally use the label of risk experts to identify the organizational roles with the specific functional tasks of measuring, controlling and managing risks inside the organization. Mikes (2009) provides a taxonomy of risk experts, distinguishing between: risk management specialists, who deal with the measurement and assessment of different types of risk, as well as with the quantification of the overall risk profile of the company; and senior risk officers, who participate in top management-level decision-making, supporting and enhancing the management of risk (see also Arena et al., 2010).

³Mikes (2011) uses the notion of risk envisionment to describe risk management practices based on risk experts’ experience and intuition rather than on risk measurement. In this perspective, soft instrumentation (i.e. decision-making methods that favour mental models, experience, beliefs and values) enters the domain of risk management.

⁴The two initial interviews with the former Head of the Planning and control area were not recorded to ensure that the informant would talk freely about the various issues (without being put off by the presence of the recorder) and to give him the necessary time to gain confidence with the research methodology. Once we believed that this confidence had been gained, we started to record the interviews with the informant's permission.

⁵During the 1990s, European legislation attempted to liberalize the banking sector, as well as to stimulate greater competition. In Italy, a new banking law (Amato Law, 1990) gave all banks the authority to operate in any financial sector and initiated a strong process of privatization. Also, a new regulation on banking groups stimulated processes of acquisition, concentration and growth in the sector (Decree Law no. 385, 1993).

⁶Following the self-regulatory code for Italian-listed companies of 1999, in the early years of the millennium, new versions of this code have increasingly incorporated risk management guidelines and prescriptions within internal control systems according to international regulation and best practice (see, for instance, the revised edition of the Corporate Governance Code, December 2011). Moreover, other regulations were promulgated in Italy during the same period with the aim of preserving the banking sector (see, for instance, Law no. 262, 2005).

⁷See the circulars and regulations issued by the Bank of Italy in 2006 onwards.

Additional information

Funding

This work was financially supported by the Italian Ministry of Research (MIUR) under project PRIN 2009: ‘From governance and risk management rules to performance: roles, tools and enabling conditions in Italian firms’.