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Risk management in practice: Controlling hearts and minds
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School of Business |
Master's thesis
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en
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71
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Risk management discourse and practices, originating in the private sector, have reached also public sector organizations, including the Finnish municipalities. Organizing uncertainty has become a part of management and governance in public organizations, included in regulation and with the help of audit implosion on risk management practices.
The fluid nature of risk management is, however, evident. In an organizational context, the specific organizational dynamics define the role and use of the risk management. The managerial controls on organizing risk management practices vary accordingly from organic to mechanistic approaches.
This thesis explores this fluid nature of risk management by utilizing the concepts of calculative culture and risk rationality. The dynamics of risk management are studied with a case study approach.
The research question of this study is: How does calculative culture affect implementation and integration of risk management practices in a Finnish municipality setting? This question is answered with the help of two sub-questions: What kind of managerial controls are used in organizing and controlling risk management? And is the study revealing practitioners like calculative idealists or pragmatists, as described in previous research? To answer these questions, a case study on a Finnish municipality was conducted. The following three findings were reached:
First, the practitioners of the case organization possessed a calculative culture that can be described as pragmatism with elements of quantitative skepticism. Also, skepticism about risk management practices were not limited to risk quantification, but formalized models of risk management were similarly dismissed. The hypothetical advantages of formalized risk management were outweighed by the belief that all risk management practices are inextricably cultural – always tied to the assumptions and values of the organization in question.
Second, stemming from this skepticism about formalized risk management, a picture of shattered risk rationality emerged. Whereas risk practices related with documentation and reporting were viewed as frustrating compliance practices, practices informed by a discursive and interactive approach were seen creating knowledge otherwise unavailable.
Third, following the risk rationality and calculative practices adopted, the case organization’s managerial controls on organizing risk management were organic rather than mechanistic. By their nature, organic managerial controls systems are more flexible, responsive, and involve fewer rules and standardized procedures than more mechanistic controls do.
Based on these findings, this study suggests that when a “pervasive performance” of risk rationality is reached, and the calculative culture is pragmatic, the management control is more organic by nature. This approach reflects a conception of future knowledge that stresses uncertainty rather than measurable risk.