Risk and budget in an uncertain world

Marika Arena and Michela Arnaboldi

International Journal of Business Performance Management, 2013, vol. 14, issue 2, 166-180

Abstract: The ability of a company to deal with uncertainty and turbulence is an issue which has attracted increasing attention in recent years, due to the negative effects of the financial crisis. In this context, the paper has the aim of exploring whether the consideration of risk in a budgeting process contributes to improve its effectiveness. To this aim, the paper analyses two potentially beneficial approaches to deal with uncertainty: the integration of information concerning risk and the use of non-financial indicators and benchmarking as early warning systems. On the basis of a survey of the largest companies in Italy (with a response rate of 41.5%), the paper shows that the effectiveness of the budgeting process increases when: 1) managers are required to produce a risk map; 2) dashboards and balanced scorecards are used in relation to the budgeting process. These results suggest the potential usefulness of integrating risk and non-financial information in budgeting, in which financial accounting information is, at present, still prevalent.

Keywords: uncertainty; turbulence; budgeting; performance management; non-financial indicators; enterprise risk management; survey; budgets; financial crisis; information integration; benchmarking; early warning systems; Italy; risk maps; dashboards; balanced scorecard; BSC. (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbpma:v:14:y:2013:i:2:p:166-180

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