Risk as threat and opportunity: the institutional logics of board risk management

We explore the social construction of risk, focusing on how organisations reconcile the duality of risk as opportunity and threat. Past research has explored this duality from either a macro, meso or micro perspective. We extend the literature to investigate the interrelationships between these layers.
The institutional logics perspective provides the theoretical foundations for our research and board directing is the context for our empirical analysis. Through their strategizing and governing activities boards are confronted with risks that present opportunities and threats and must manage these risks in an environment of conflicting social identities and goals that are bounded by limited resources and cognition.
Through the analysis of 30 semi-structured interviews with executive and nonexecutive directors we find that tensions and trade-offs within and between the macro, meso and micro layers present challenges to boards attempting to balance the duality of risk as opportunity and threat. In many boards a ‘governance and compliance’ logic dominates, emphasising threat reduction and value protection. In a very few a ‘strategic-swashbuckling’ logic dominates, which gives primacy to value creation via opportunity exploitation. We also find evidence of a nascent ‘appetite aware’ logic, rooted in the notion of ‘risk appetite’ and spread by risk experts acting as non-executive directors or board facilitators.