Risk-based management control resistance in a context of institutional complexity: evidence from an emerging economy

Abstract

Purpose The purpose of this study is to examine the impact of competing logics on the implementation of risk-based management controls (RBMC) by providing evidence of resistance due to competing logics. Moreover, the study proposes solutions to logic contestation. These solutions may help the company override logic complexity. Design/methodology/approach This study draws upon the theory of institutional logics. It adopts an interpretative qualitative research approach and uses the case study method. Data were collected from one of the biggest private sector insurance companies in Egypt through a triangulation of interviews, observations and documents. Findings We found that internalised and institutionalised roles and structures – represented by the incumbent corporate and community-related sets of logics – compete and disrupt the emerging enterprise risk management and RBMCs. The newly imposed RBMCs produced heterogenic practices that changed the means of controls at the case company. However, this change was faced by resistance from local employees, as it represented a challenge to the prevailing cultural symbols and norms in their traditional work environment. Originality/value This study contributes to the literature by offering new evidence on resistance to Western risk-based management control projects applied in emerging markets. Moreover, it extends the cultural political economy of management accounting and control by illustrating that management accounting in emerging markets is also an operational manifestation of culture, community and location.

An institutional analysis of the risk management process during the COVID-19 pandemic: evidence from an emerging market

“…The COVID-19 pandemic contributed to more pressures from international rating agencies and international reinsurers upon insurers to embed enterprise risk management (ERM), which necessitates the adoption of Solvency II capital adequacy requirements (Metwally and Diab, 2021). Within the present context, where several risks have emerged following the COVID-19 pandemic, it is expected that the risk management (RM) department would play a key role in setting the company strategy and promoting its financial and operational resilience (Naseeb et al , 2021).…”

“…The rise of ERM has inspired more studies to examine its conceptualisation and interactions with organisational apparatuses and how that led to new modes of controls (Bhimani, 2009; Huber and Scheytt, 2013; Tekathen and Dechow, 2013; Vinnari and Skaebaek, 2014). However, most of these studies focus on the risk-based management practices in both the west and least-developed countries (LDCs) (Metwally and Diab, 2021).…”

“…Using the theory of institutional logics (Thornton et al , 2012) and institutional multiplicity (Besharov and Smith, 2014), the current work contributes to the literature by bringing early evidence on the impact of the COVID-19 pandemic on chief risk officers’ (CROs’) identities, roles and RM practices. In doing so, we engage in the current debate on how RM practices in emerging markets are being shaped by cultural, economic and political factors (Metwally and Diab, 2021). Our empirical findings suggest a different story from the one reported in the literature.…”

Budgetary control and risk management institutionalization: a field study of three state-owned enterprises in China

“…He further argues that already institutionalized structures and procedures can legitimize the adoption of new structures or procedures. When existing institutionalized elements are used to legitimate new elements, the new elements tend to be more acceptable and effective (Zucker, 1987); otherwise, the implementation of a new system such as ERM will likely face resistance from people in the companies (Metwally and Diab, 2021). Soin and Collier (2013) argue that ERM has become the central theme of management control systems.…”

“…Based on an experimental study using 92 certified external auditors, they find that external auditors' reliance on the ERM advice from the internal auditors is highest when the internal auditors are under the supervision of a strong audit committee. Metwally and Diab (2021) use an interpretative qualitative research method to obtain data from insurance companies in Egypt through interviews, observations and a review of documents. They found that the ERM implementation produces heterogenic practices that change the companies' existing control system leading to resistance from employees because the institutionalization of ERM challenges the traditional work environment and organizational culture.…”