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As innovation entails risk, it seems only natural that risk management practises should be the core enablers of innovation within companies. Yet, the risk management function is often portrayed as the innovation “killer" in organisations. In this chapter we shed light onto this innovation and risk management jigsaw puzzle. We summarise the innovation typologies found in the literature to two broad approaches by which companies attempt to innovate: undertaking incremental or radical innovation efforts. The former seeks to introduce changes that lie close to the current offerings and processes of an organisation; the latter aims to pursue objectives that lie more distant to the current organisational undertakings. We posit that risk management practises should be aligned with the type of innovation companies pursue, and question whether it is this misalignment that might explain the original puzzle. We argue that traditional risk management approaches cope well with incremental innovation. But radical innovation requires a different risk management approach. We conclude with a novel framework for risk management suitable for radical innovation and discuss the managerial implications.
This chapter analyses the changing risk culture of UK clearing banks by charting the rise of more active asset and liability management. We focus particularly on the banks’ entry into the wholesale money markets and residential mortgage lending. The pattern of household property tenure changed significantly over the twentieth century. Before World War One less than a quarter of English households owned their homes. There was little demand for mortgages, and even less appetite on the part of bankers to supply them. By 2006, nearly three-quarters of English households were owner-occupiers with mortgages comprising two-thirds of clearing bank assets. The banks had transformed from conservative institutions that largely matched short-term retail deposits with short-term assets into real-estate lenders heavily reliant on wholesale funding. This asset-liability maturity mismatch was at the heart of the Global Financial Crisis. We conclude that the regulatory changes implemented in the wake of the Crisis have failed adequately to address this fundamental issue.
Objective: Gain a familiarity with approaches to constructing models for prescription development, as well as basic approaches to deriving prescriptions from those models.
A revolution in the measurement and reporting of government performance through the use of published metrics, rankings and reports has swept the globe at all levels of government. Performance metrics now inform important decisions by politicians, public managers and citizens. However, this performance movement has neglected a second revolution in behavioral science that has revealed cognitive limitations and biases in people's identification, perception, understanding and use of information. This Element introduces a new approach - behavioral public performance - that connects these two revolutions. Drawing especially on evidence from experiments, this approach examines the influence of characteristics of numbers, subtle framing of information, choice of benchmarks or comparisons, human motivation and information sources. These factors combine with the characteristics of information users and the political context to shape perceptions, judgment and decisions. Behavioral public performance suggests lessons to improve design and use of performance metrics in public management and democratic accountability.
Anchored in conservation of resources theory, this study considers how employees' experience of job stress might reduce their organizational citizenship behaviors (OCB), as well as how this negative relationship might be buffered by employees' access to two personal resources (passion for work and adaptive humor) and two contextual resources (peer communication and forgiving climate). Data from a Mexican-based organization reveal that felt job stress diminishes OCB, but the effect is subdued at higher levels of the four studied resources. This study accordingly adds to extant research by elucidating when the actual experience of job stress is more or less likely to steer employees away from OCB – that is, when they have access to specific resources that hitherto have been considered direct enablers of such efforts instead of buffers of employees' negative behavioral responses to job stress.
Drawing on the job-demand resource theory, the article examines the relative importance and the complementarity of three widely practiced leadership styles – transformational, paternalistic, and authoritarian. It investigates how the three styles relate to followers’ work engagement amongst employees in Russian domestic organizations. It also theorizes and tests the mediating effects of three psychological mechanisms, namely self-efficacy, self-esteem, and job control, on the examined relationships. The findings show that all three leadership styles relate to followers’ work engagement positively. The relationship of transformational leadership is dominant and mediated by all three psychological mechanisms. The remaining two styles also make their unique contributions to followers’ work engagement. Whereas authoritarian leadership influences followers by enhancing their self-efficacy and self-esteem, paternalistic leadership operates more extrinsically by increasing followers’ job control. Surprisingly, our analyses found that the role of control variables such as gender, age, and hierarchical position were insignificant in predicting how the three leadership styles influence employee work engagement. The study is among the first to shed light on the relative importance of the three focal leadership styles, their differential influences and interrelations, and the different mechanisms through which they relate to followers’ work engagement.
The one bad apple spoiling the whole barrel has become a common metaphor used with reference to risk culture in organisations. This “inside-out” perspective begins with the individual as the unit of analysis and follows with inferences to the broader environment. Since the Global Financial Crisis (GFC) of 2008, risk culture for many has become the explanation for shortcomings, poor decisions, and moral failures in organisations. This volume presents an institutional perspective of the forces that shape risk culture, and culture more generally, in organisations through a multi-disciplinary examination from a variety of leading academics and subject specialists. The authors demonstrate that firms play a role as manufacturers and managers of risk and they challenge common conceptions that attribute risk to chance circumstances or rogue behaviours. The foundational concepts needed for an institutional view of risk culture are highlighted with subsequent links to significant developments within society and firms.
I examine whether firms’ use of alternative work arrangements, particularly temporary agency workers, affects their cost of equity. Exploiting a major labor-market deregulation in Japan that induced manufacturing firms to increase their employment of temporary agency workers, I show that the cost of equity decreased in manufacturing firms, relative to nonmanufacturing firms, after the deregulation. Further analysis using variations within manufacturing firms provides corroborating evidence. The rigidity in labor expenses and the cost of debt also decreased in manufacturing firms. Overall, alternative work arrangements increase the flexibility in labor costs, leading to lower operating leverage and cost of capital.