Unpacking the Fluidity of Management Accounting Concepts: An Ethnographic Social Site Analysis of Enterprise Risk Management

Abstract

This study offers new insights into what renders management accounting concepts (MACs) fluid. Extant literature depicts how fluidity is an effect of heterogeneous associations among actors, which translate and mobilize them in situated and variegated forms. This focus on heterogeneous arrangements, however, tends to neglect the role of practices and how these practices render MACs fluid. Hence, the study investigates how practices, together with arrangements, which Schatzki (2002. The site of the social: A philosophical account of the constitution of social life and change. University Park, PA: Pennsylvania State University Press) refers to as ‘site’ (i.e. a mesh-work of practice-arrangement bundles), are implicated in MACs’ fluidity. To do so, an ethnography of the MAC ‘Enterprise Risk Management’ (ERM) at the largest division of a multi-national manufacturer was conducted. By analyzing attended risk meetings, the paper shows the ways in which the ERM site prefigures multitudinous paths for carrying on and carrying out risk management activities, which in turn, render the ERM site into a fluid space of intelligibility. These findings indicate that MACs’ fluidity is associated with multidimensional prefigurements that the site produces. With these insights, the paper contributes to understanding how the situated functionality of management accounting comes about, and reveals nuances and multiplicities amid the enabling and constraining space for actions that practiced MACs as mesh-work engender.

Keywords:

• Management accounting concepts
• Enterprise risk management
• Ethnography
• Fluidity
• Site ontology

JEL classifications:

• M40 (Accounting General)

Acknowledgements

The author would like to thank Teemu Malmi (associate editor) and the two anonymous reviewers for their advice and guidance throughout the review process. He is also grateful for the helpful comments received from Matt Bamber, Michael Bourne, Niels Dechow, Marjo-Riitta Diehl, and further colleagues at Concordia University. He would like to further thank respectively the discussant Lisa Baillargeon, Zhihong Wang, and Danture Wickramasinghe (also for his additional review) as well as participants at the 5th Research Workshop on Management Control by the Association en Contrôle de Gestion (ACG), at the Canadian Academic Accounting Association (CAAA) 2016 Conference, at the Critical Perspectives on Accounting 2017 Conference, and at the research seminars at York University and Concordia University for their valuable feedback and suggestions.

Supplemental Data

Supplemental data for this article can be accessed at https://doi.org/10.1080/09638180.2019.1575759.

Notes

1 COSO (2004) defines ERM as

a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. (p. 4)

2 ERM is regarded as a MAC as it aims at supporting firms in achieving their organizational objectives in uncertain business environments (cf. COSO ERM, ISO 31,000). Prior studies have done so to contribute to management accounting literature (e.g., calculative cultures (Mikes, 2009); toolmaking (Hall, Mikes, & Millo, 2015), or risk map as a mediating device (Jordan, Jørgensen, & Mitterhofer, 2013)).

3 Understood as shaping, influencing, or affecting.

4 Schatzki (2002) notes that most practice theorists are also site ontologists given their Heideggerian provenance. Schatzki uses the label site ontologists to emphasize that their theorizing of context is different from individualist and non-individualist (societist) views (Schatzki, 2003).

5 Using the phrasal verbs of ‘carrying out’ and ‘carrying on’ signifies the mutual constitution of actions and practices that practice theorists presume (Feldman & Orlikowski, 2011; Schatzki, 2002). Practices are both ‘organized’ and ‘open-ended’ spatial–temporal manifolds of actions (Schatzki, 2005, p. 471): actions execute practices (i.e., actions carry out practices), but in carrying these on, practices also change. They are continuously evolving. In that sense, actions both maintain and alter practices.

6 The five risk categories are market, product, process, employee, and finance.

7 The explication phase focuses on understanding the data through re-constructing the ethnographic encounters. The explanation phase de-constructs the collected data to make sense of the ethnographic encounters. The exploration phase synthesizes and constructs the subsequently presented case narrative in light of the analytical interpretation according to the research aim.

8 The figure is developed and explained in Online Appendix B.

9 Following Schatzki (2002), actions are understood as doings and sayings.

10 CRMS was never physically present during the meetings in terms of participants logging into the software to review risk titles. Instead, risk titles were extracted from the software and then brought to the meetings as print-outs. After the meetings, the discussed changes were entered, either by the risk assistant or the respective risk officer, into CRMS.

11 For confidentiality reasons, figures were altered without changing the relative relationship between corresponding figures. This way, the substance of the reported figures is, in the opinion of the author, unhampered.

12 At the time of the meeting, the resulting value was still unknown. In the end, the March sales plan confirmed 73,000 units, leaving only a margin risk for sales in Business Unit A.

13 In total, five different combinations were discussed during the meeting.

14 Qualitative risk assessment works with four impact and likelihood categories: low, medium, high, and very high.

15 Things and organisms were not identified in the ERM site analysis.