Reconciling risk as threat and opportunity: the social construction of risk in boardrooms

Board directing is a continuous process of risk analysis and control in response to the duality of risk as threat and opportunity. Judgements are made and re-made to simultaneously reduce the potential for damaging threats (e.g., fraud, reputation damage), whilst exploiting opportunities (e.g., new product development, mergers and acquisitions). Adopting an institutional logics approach, we explore this process of risk analysis and control through the
varied subject identities (e.g., directorial roles), risk management practices (the procedures and tools used to identify, assess and control risk), and risk objects (the product of risk identification, assessment and control, e.g. a risk matrix or register) of boards. We argue that the contingent interaction between these identities, practices and objects inform the ‘risk logic’ of a board, which may draw attention to the notion of risk as threat, risk as opportunity or both
threat and opportunity. Using the testimony of 30 executive and nonexecutive directors that represent 62 companies from a range of public, private and third sector organizations, we contribute to the literature on the micro-foundations of risk analysis in organizations by shining a light on how board directors understand, assess, control and ultimately govern risk in organizations.