Factors that shape an organisation's risk appetite: insights from the international hotel industry

Since the 2008 global financial crisis, a major challenge for the Board of Directors (BoD) and risk managers of large, public corporations has been to clearly define and articulate their company‟s risk appetite. Considered as a business imperative to ensure successful enterprise risk management, risk appetite has been widely discussed among practitioners and, more recently, academics. Whilst much emphasis has been placed upon defining risk appetite and identifying the ways in which an organisation‟s risk appetite statement can be articulated, the literature has largely ignored the critical idea that risk appetite is not a „static picture‟, but changes over time according to a variety of factors residing in the organisation‟s internal and external contexts. Using the international hotel industry as research context, this study explores the underlying factors that shape an organisation‟s risk appetite. Building on the „living organisation‟ thinking and employing the „living composition‟ model as a conceptual lens, this thesis integrated several strands of literature related to risk appetite, organisational risk taking and individual risk taking, and developed a conceptual framework of factors that shape an organisation‟s risk appetite. Given the scarcity of risk appetite research, an exploratory, qualitative approach was adopted and the fieldwork was conducted in two stages: stage one served to gain a generic-business perspective of the main factors that shape an organisation‟s risk appetite. Data was gathered from ten risk consultants using unstructured in-depth interviews. The findings were subsequently validated and further explored in stage two, which involves a case study of two publicly listed international hotel companies with different risk appetites. Questionnaires and follow-up semi-structured interviews were used to collect data from sixteen corporate executives and risk managers in order to understand the factors that shape their organisation‟s risk appetite. The findings indicated that an organisation‟s risk appetite is collectively shaped by a set of „organisational‟, „environmental‟ and „decision-maker‟ factors. While most factors are shared between the case organisations, the significance of each factor to risk appetite, the ways in which each factor shapes the risk appetite and the interrelationships among different factors are dissimilar. This led to the development of a „living organisation‟ framework of factors that shape an organisation‟s risk appetite, which is a key contribution to knowledge of this study. The findings also revealed how corporate executives and risk managers understand the concept of risk appetite, thus contributing to the literature with an „end user‟ perspective of risk appetite definition, as well as a unique „black hole‟ analogy of risk appetite. Not only can the findings facilitate a more accurate and meaningful articulation of an organisation‟s risk appetite statements, they also highlight the need for corporate executives and risk managers to regularly monitor and update their organisations‟ risk appetite. To this end, the „living organisation‟ framework of factors that shape an organisation‟s risk appetite provides a basis for the development of a risk appetite monitoring system, as well as a tool for modifying the risk appetite.

Grantor dc:publisher

Oxford Brookes University

Year dc:date

2016

Author dc:creator

• Zhang, Xiaolei

Contributors dc:contributor

• Paraskevas, Alexandros
• Bowie, David
• Lashley, Conrad

Statement dc:rights

• All rights reserved

Language dc:language

en

DOI dc:identifier

https://doi.org/10.24384/hxvq-b137

OAI identifier oai:identifier

tle:112dec64-26ca-40a7-9ca2-c617effefb2a:d6bd9758-527a-46cd-bfe2-c433766e8fca:1