The Long-Term Patterns of Organizational Risks: Examining the Persistence of Risks and Their Impact on Management in Organizational Change

Abstract

Change in the corporate world is ubiquitous but beset with risks. Long term patterns of change have been studied extensively and from many theoretical perspectives, but rarely from the vantage point of risks. This study aims to tackle the empirical sub-problem of what happens to organizational risks over time if traced within the confines of a specific industry over an extended period of time. It does so by answering the sub-questions: 1. What are some of the patterns by which organizational risks change over time? 2. Is the way that an organizational risk changes over time dependent on the longevity of the risk? Furthermore, 3. Do the patterns of change in risks share any parallels with broader tempos of organizational change? The explorative qualitative research is designed as an inductive longitudinal multiple-case study. The unit of analysis is organizational risks that are manifest in risk factors texts from the annual reports of three telecommunications equipment manufacturers. The recurrences of individual risk texts are traced over 15 years, and the resulting time-series distributions of risks being introduced and removed are compiled using the change events that happen on an annual basis for each firm. Further comparison of change patterns and risk texts across the organizations, and the direct mapped visual data from the tracing of risks is used in pattern analysis in support of conceptual development with the objective of finding qualitative explanation and description of how the risks change over time. The findings are that 1. risks can be categorized based on their persistence in subsequent years’ reports as persistent or temporary risks. 2. If there is added a further categorization of risks based on whether they are unique to one organization or more widely recognized industry-wide, a relationship pattern emerges that most temporary risks tend to be unique to one organization while the vast majority of persistent risks can be found on multiple companies’ lists within the industry. It suggests that as risks become longer lasting, they are more likely to affect everyone. Nonetheless, a small fraction of persistent risks ignore this ‘rule’ by not being shared across firms, which could be used to infer a heightened strategic significance to those risks, because their existence breaks the otherwise stale symmetry in long-term risk between competing organizations. Furthermore, the risks largely change as would be expected if the assumption is that they change in accordance with wider patterns of organizational change. The risks went through periods of stability separated by brief flareups of sudden, widespread change consistent with the punctuated equilibrium model of organizational change. Changes in risks also follow periodic patterns during periods of incremental change.