Tone from the Top in Risk Management: A Complementarity Perspective on How Control Systems Influence Risk Awareness
Isabella Grabner and
No 03/2020, Department for Strategy and Innovation Working Paper Series from WU Vienna University of Economics and Business
Prompted by the weaknesses of standardized risk management approaches in the aftermath of the 2008 financial crisis, scholars, regulators, and practitioners alike emphasize the importance of creating a risk-aware culture in organizations. Recent insights highlight the special role of tone from the top as crucial driver of risk awareness. In this study, we take a systems-perspective on control system design to investigate the role of tone from the top in creating risk awareness. In particular, we argue that both interactive and diagnostic use of budgets and performance measures interact with tone from the top in managing risk awareness. Our results show that interactive control strengthens the effect of tone from the top on risk awareness, while tone from the top and diagnostic control are, on average, not interrelated with regard to creating risk awareness. To shed light on the boundary conditions of the proposed interdependencies, we further investigate whether the predicted interdependencies are sensitive to the level of perceived environmental uncertainty. We find that the effect of tone from the top and interactive control becomes significantly stronger in a situation of high perceived environmental uncertainty. Most interestingly, tone from the top and diagnostic control are complements with regard to risk awareness in settings of low perceived environmental uncertainty and substitutes at high levels of perceived environmental uncertainty.
Keywords: Tone from the top; risk awareness; interactive and diagnostic use of budgets and performance measures; perceived environmental uncertainty; SMEs (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://epub.wu.ac.at/7403/ original version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wiw:wus055:7403
Access Statistics for this paper
More papers in Department for Strategy and Innovation Working Paper Series from WU Vienna University of Economics and Business Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by WU Library ().