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Organizational Encounters with Risk
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  • Page extent: 284 pages
  • Size: 228 x 152 mm
  • Weight: 0.59 kg

Library of Congress

  • Dewey number: 658.155
  • Dewey version: 22
  • LC Classification: n/a
  • LC Subject headings:
    • Risk management
    • Risk assessment

Library of Congress Record

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Hardback

 (ISBN-13: 9780521846806 | ISBN-10: 0521846803)

Manufactured on demand: supplied direct from the printer

$113.00 (C)
Organizational Encounters with Risk


Cambridge University Press
0521846803 - Organizational Encounters with Risk - by Bridget Hutter and Michael Power
Index


Subject index

Acceptable Risk Process, the 40, 42–57, 58

accidents

   accident investigation, accusatorial style 84–5

   British Railways

      accidents as indicators of risk 73

         information flows 76

         non-reporting of accidents 75

         understanding of causes 73–4, 75, 76–7

   Clapham Junction train crash 82

   Hatfield train crash, criminal prosecution 84

   Ladbroke Grove rail accident 83

   Southall rail accident 83, 84

   Three Mile Island accident 17, 25

accountability, methods of assuring 227–8

accountants, and risk 5

Accountants’ Joint Disciplinary Scheme 81

adverse selection 152

agency, of individuals in organizations 68

Agency for Health Care Policy [now Quality] and Research 106–7

agency problems 152–3

Air Traffic Control 35 see also National Air Transportation System

Al-Qaeda, see terrorism, 9/11 terrorist attacks

anomalies, trajectory of 34

arbitrage

   derivatives pricing 171–2, 173, 177, 187

      LTCM crisis 172

      market efficiency 174–5

      martingale theory 172–3, 179

      Modigliani and Miller’s proof 171

      potential instability of success 188–9

      role in modern theory of finance 170

      VAR models 183–4 see also Long-Term Capital Management


Barings Bank Collapse, see disasters

Basel Committee on Banking Supervision 26, 134, 146, 183–4

Bhopal chemical plant 3, 4, 192, 211, 212, 231

   accountability 227

   background complexity 213

   explanations for 23, 203

      lack of consensus 215

   legal disputes 214

   long-term impact 5, 215

   medical evidence 213–14

   objectivity of official fact-finding 229

   public demonstration 228

   public knowledge-making 226

   victims’ groups 216

blame

   blame-shifting strategies 140–1, 142

   British Railways

      corporate responsibility 82

         blame distribution 86–9

         safety departments 89–90

   and chief risk officers 140–1

   politics of 21, 85–6

   health and safety regulation 71–2

      compliance with 80

   occupational health risks 74

   re-organization

      fatalistic view of risk 78

      at individual level 79

      and near misses 78

   ways of encountering risk 74

BSE food safety crisis 211, 216–17

   accepted bases of expertise 230

   Blair, Tony, and BSE 218

   containment policy 217

   Creutzfeld-Jakob disease 218

   objectivity of official fact-finding 229

   public demonstration 228

   public inquiry 218–19, 227, 228, 231

      individual responsibility 220–1

      responsibility of MAFF 219–20

   public mistrust of government 218


Challenger disaster, see disasters

Chernobyl radiation leakage, see disasters

CIA, see terrorism, 9/11

civic dislocation 218

civic epistemologies 230–2

   and 9/11 227

   and Bhopal disaster 216, 226

   and BSE 218, 221, 227

   concept of 226

   cross-national comparisons 226, 230, 231

   determination of cause 212

   and risk management 211

Clean Air Act Amendments (1990) 198, 205

clinical practice guidelines 96, 98, 127, 129

   codification of medical knowledge 100–1, 129

   development of 105–7

   evidence-based medicine 101–3

   and malpractice litigation 108–10, 112–13

   requirement of medical expertise 110

   standard of care 111

collective learning 209

   change in 210

   of nation states 210–11

Columbia Accident Investigation Board 65

Commission for Healthcare Audit and Inspection 26

Committee of the Sponsoring Organizations of the Treadway Commission (COSO) 19, 25, 135, 142

Conference Board of Canada 132, 135, 140

contingent claims 173

corporate manslaughter 82

corporate responsibility, see Bhopal chemical plant

Council for International Organization of Medical Sciences 121

Council of Chief Risk Officers 140

Counterterrorism Center (CTC) 224

criminal prosecution, and responsibility for accidents 83–4

Critical Items List 43–4, 47, 59


defensive medicine 94, 108

disasters, see also Bhopal chemical plant; terrorism, 9/11 Commission

   Barings Bank collapse 14, 23, 24, 192, 200

      risk attribution 81

   Challenger disaster 14, 34–5, 45, 59, 65, 86

   Chernobyl radiation leakage 3, 4

   Columbia disaster 65

   Enron, collapse of 4, 20, 23

      and risk management 12

   Herald of Free Enterprise, the 82

   King’s Cross fire 24, 82

   organizational origins 3, 4, 5

   Parmalat, and risk regulation 5

   Savings and Loans Bank, failure of 3, 4

   Worldcom collapse 4, 23

drug testing 113, 115–16

   AMA code of ethics 118

   benevolent deception 117

   Code of Federal Regulations 119

   LSD 119

   written consent 117

   Yellow Fever 117


early warning signs

   comparison of NASA and NATS 61

   misinterpretation of 33–4

enterprise risk management (ERM) 21, 25

   and Chief Risk Officers 133, 136, 143

ethics

   AMA regulations of ethical conduct of research 118

   Applied Research Ethics National Association 121

   human research subjects, protection of 119

   informed consent statutes 94–6 see also scientific research

   Maine Medical Malpractice Demonstration Project 109

experts

   BP, and Chief Risk Officers 137

   chief information officers 137

   chief operating officers 138

   Chief Risk Officer (CRO) 26

      control of professional language 145–6

      economic explanations for 139–40

      institutional explanations for 140, 141, 147–8

      interface with CFO and CEO 144–5, 148

      performance issues 141

      role of 132–3, 142–3, 146–7

         change in 134–7, 139

      status of 143–4, 146

      Sun Life Financial, and Chief Risk Officer 137

   compliance officers 138, 142

   expertise, accepted bases of 229–30

   safety officers 89–90, 138


familiarity, and risk perception 77

Federal Aviation Administration (FAA) 20

   National Air Transportation Systems (NATS) 33

finance, see also arbitrage

   1998 crisis 167

      effect on financial system 168, 182 see also Long-Term Capital Management

   Amex Financial Advisors 134

   financial information on companies 205

   global financial system 168, 169, 182

   log-normality, in option pricing 171, 172

finance theory

   counterperformative nature of 1998 crisis 186–9

   performative dimension of 170, 177–9, 186 see also predictions, accuracy of

financial markets

   Afghanistan war, and financial markets 168

   slippage, in financial markets 176, 177

   transaction speed, in financial markets 176

financial risk management

   sources of risk 16

   and technology 16 see also Long-Term Capital Management

Financial Services Authority 26

   risk-based philosophy 20

Flight Readiness Review 44–5, 47, 59

flight to quality 182–3, 185

free-rider problem, in principal–agent relationships 156, 161


gag clauses 97, 124, 125, 127

governance protocols, in medicine 96–7, 98, 122–3, 128, 129

   managed care regulations 123–7


health care, see medical treatment

hidden action, see moral hazard

hidden information, see adverse selection

high reliability organizations, and risk tolerance 20, 57

High Reliability Theory 57

High Risk Opportunities, failure of 182


imitation

   1998 financial crisis 187–8, 189

   increase in correlations 188

incentives 153–5

   agency problems 153–5

   choice of schemes 157

   competition effects 164–5

   identities of organizations 162

   innovation 165–6

   market forces 157

   moral hazard in teams 156

   multiple principals 156–7

   multi-tasking 155–6

   performance measurement 155, 157

   and risk 149–50 see also missions, of organization-3M’s approach

incentives for risk-reduction 190–1, 192, 206

   externalities 191

   government standards 198–9

   internal rules 197–8

   non-additivity of damages 191

   principal–agent problems 201–2

   tipping behaviour 200–1

   uncertainty 191

information systems

   and risk management 7, 11–13

      in BR 76

innovation, and risk management 29

Institute of Medicine, Committee on Clinical Practice Guidelines 101–3, 107

Institutional Review Boards (IRBs), problems of 121–2

insurance

   malpractice claims and guidelines 108–10

   and medical care 93, 106

   third party protection 198, 199

   threshold models 202–3

interdependent security (IDS)

   in chemical plants with two agents 192–5

   coordination 203–4

   importance of 207–8

   multi-agent plants 195–7

   principal–agent problems 201–2

      dynamic models 202

      multi-period models 202

      threshold models 202–3

   problems 206

   risk estimation 204–6

International Air Transport Association (IATA) 204

interpretative flexibility 42, 46, 52, 54

intra-organizational independence, and risk management 14


Joint Commission on Accreditation of Healthcare Organizations 94, 102, 111

JWM Partners 185

   risk model 188


learning and experience

   after catastrophe 211–12

   group communication 209–10

   see also civic epistemology

Leeson, Nick 14, 23, 200

   risk attribution 81

legislation

   Financial Services Act (1986) 138

   Health Maintenance Organization Act 123

   Healthcare Research and Quality Act (1999) 107

   Helsinki Declaration 118, 121

   legal liability 21

      medical work 22

      response to risk 95

      standardization of internal process 28–9

   legislation post accidents 80

   National Research Act 118, 119

   prompted by accidents 80

   Sarbanes-Oxley Act (2002) 5, 6, 21, 23, 25, 26

      material weaknesses 27

Long-Term Capital Management (LTCM)

   1998 crisis 168, 169, 184–5

      flight to quality 182–3, 185

      reasons for 185–6, 188

      stock index options 181–2

   Merton and Scholes 169, 179

   theory of finance 169–70, 172, 181

   VAR models 183–4


martingales, see arbitrage

matching 158, 161–2

   and competition 165

medical education

   scientific research 115

   standardization 102

medical effectiveness coalition 105

   government funding 106–7

medical protocols

   and legitimate complexity 110

   sources of problems 104–5

medical research

   risks of 92–3

   rules of conduct 96, 98, 113–14, 120, 127, 129, 130–1

      complexity of 121–2

      ethics regulations 118–20

      rational therapeutics 115

      reactive 114 see also drug testing; rules

medical treatment

   costs of 124, 125

   lack of 93

   physician competence 113

   role of law 93–4, 111–12

   variability studies 103–4

   written consent 117 see also rules

Medicare/Medicaid rules 124

Meriwether, John, and LTCM 179, 184, 185

MIC, see Bhopal chemical plant

Ministry of Agriculture, Fisheries and Food (MAFF), see BSE food safety crisis

missions, of organization 158, 159–60

   3M’s approach 150, 166

   public 164

   Whitehall village 163

moral hazard 152

motivation 158, 160–1

   public and private sector differences 164


National Aeronautics and Space Administration (NASA) 2, 20, 33, 36

   definition of anomalies 37, 38, 39, 58–9

      and identification 62

   origin of technologies of control 63

   post-accident rituals 63–4

   rules and procedures on risk decisions 40–7, 58

   Space Shuttle Program 37, 40–1

      pre-launch process 37

   surveillance technologies 46

   work practices 41, 46

      in-house training 46

National Air Transportation System (NATS) 36, 47–8

   definition of anomalies 38–9

      identification 50–2, 56, 59, 62

   origin of technologies of control 63

   post-accident rituals 63–4

   pre-launch process 37, 38

   rules and procedures on risk decisions 48, 50, 56, 58

      Operational Error 52, 54–5, 64

      Rules of Separation 52, 53, 54, 56, 60

   surveillance technologies 51, 52–3, 56, 60

   work practices

      Conflict Alerts 53–5

      training 48–50, 55

near misses

   data on 205

   impact on re-organization 78

   organizational response to 14–16, 27

normalization of deviance (notional normality) 14, 15, 34, 47, 59


option pricing model 16, 176

   and LTCM 181–2

   performative aspect 178, 186

organizations

   compliance with health and safety 80, 137

   control agents and legalization 139, 147

   failure 23, 223

   identity of 162

   incentives for risk-reduction 190–1, 192, 206

   and intent 68, 84

   internal hierarchies 143–4

   legal perception of 81

   organizational behaviour, rational view 69

   re-organization of 25–6

   risk management 11, 17, 188

   risk regulation 6–7, 198–9

   risk society 1

   under-investment in risk prevention measures 191

   understandings of risk 72–8, 90–1 see also British Railways; Chief Risk Officers; interdependent security (IDS); missions, of organizations (esp. 3M’s approach); principal–agent relationships


Phillips Inquiry, see BSE food safety crisis

political forces, and risk 211 see also civic epistemologies

predictions, accuracy of

   and arbitrage opportunities 177

   in option pricing model 176

principal–agent relationships

   description of 151–3

   evidence of agency problems 157–8

   and IDS 201–2

   incentive schemes 153–5

   regulatory role 7

   and risk management 2, 149 see also incentives; missions, of organization – 3M’s approach

professional associations

   Association of Insurance and Risk Managers 135, 141

   and Chief Risk Officers 145

   in medicine 94, 101

Professional Standards Review Organizations, and cost surveillance 124

public inquiries

   BSE 218–21

   government responsibility 85

   risk protocols 80


railways, and risk 13, 15

   explanation of disasters 23

   location of 20 see also British Railways; legislation

rationality

   and imitation 187–8

   and market efficiency 174–5

regulator

   Food and Drug Administration (FDA) 93, 94, 96

   Food Standards Agency 26, 219, 231

   Health and Safety Executive 83

   Health Maintenance Organization (HMO) 93, 127

   Institute of Nuclear Power Operations (INPO) 25

   Securities and Exchange Commission (SEC) 20

reports

   Hidden Report, A 13, 82–3, 85

   Uff, Professor John 84

   US Army Yellow Fever Commission 117

   US Environmental Protection Agency (EPA) 199

      Risk Management Plan 198–9

      Wharton Risk Management and Decision Processes Centre 204

responsibility and blame 21, 69, 82–3

   of individuals 82, 83

   in legal system 69, 82–3

      rules on negligence 126

   management systems 70–1

   in medical care 126–7

   within organizations 85–6

      delegation 86 see also disasters – Barings Bank collapse; Bhopal chemical plant; BSE food safety crisis; civic epistemologies

Risk Adjusted Rate of Return on Capital (RAROC) 136, 142, 144

Risk and Insurance Managers Society 137

risk appetite 7, 9

risk aversion

   martingale theory 173

   principal–agent relationships 153, 154

risk encounters, organizations

   concept of 6, 9, 10–11, 13

   cultural understanding of 61–2, 72

   futility of advance planning 225

   identification 11, 70

   organization of attention 13–16

      role of technology 16–18

   reduction of 62, 149

   re-organizing activity 25–30

      fatalistic views 78

      near misses 78

   research into technologies of control 64–5

   rise of Chief Risk Officers 133

   sense-making 9, 18–25, 76, 211, 219–20, 230–2 see also medical research; responsibility; terrorism – 9/11 Commission, 9/11 terrorist attack

risk incubation 11, 12, 15 see also near misses

risk management

   analysis 7

   anticipatory responses 28

   balance with incentives 149

   compliance strategy 36–7

      NASA 42, 62

   concept of 2

   dedicated units 134

   demonstration of benefits 30

   deterrence strategy 36–7, 55, 59–60, 62

   financial motivation 149–50

   language of 21–2

   models and market volatility 16

   notional normality 14, 15

   regulatory process 9

   risks of 1–2, 3, 148, 183

   uncertainty 10 see also British Railways; interdependent security; National Aeronautics and Space Administration; National Air Transportation System; responsibility

Risk Management Plans 198–9

risk perception, variation in 8

risk professionals, see experts

risk society thesis 1, 6

routine non-conformity 33, 57, 58–9

rules, in medical community 94–6, 103

   effect of 95

   production of 97 see also clinical practice guidelines; governance protocols; medical protocols; medical research

Rules of Separation 52


scale of disaster 19

scientific research

   applicability to medicine 102–3, 113, 115

      in developing counries 114

Securities and Futures Association 81

security services, structural weaknesses in 4

September 11 terrorist attacks, see terrorism – 9/11 terrorist attacks

social amplification of risk framework (SARF) 13

structure and agency, relationship between 68–9


technological indicators, human misinterpretation of 17

technological systems, and group behaviour 210

technology, and organization of attention to risk 16–18

terrorism

   9/11 Commission 4, 222–4

   9/11 terrorist attacks 211

      accountability 228

      objectivity of official fact-finding 229

      organizational consequences 3–4

         exercise of imagination 223–4

      public demonstration 228

      sense-making 24, 221–2, 227, 231

         intelligence failure 222–3

         need for interdependent security 207–8

         Posner view 224–5, 231

         technological disaster 222, 224

terrorist attack, see terrorism – 9/11 terrorist attacks


Union Carbide, see Bhopal chemical plant


value-at-risk (VAR) models 136, 142, 144, 147

   in banks 183

   and LTCM 180, 183–4


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