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In 2007, a well-known and cherished Professor of Accounting Research, Michael Power published his highly credited book - Organised Uncertainty: Designing a world of Risk Management. Ultimately, it has been argued that this book is an extension of Power’s previous book ‘the Audit Society’ which exemplifies his view of Audit, with reference to the ‘audit explosion’; demonstrating the importance of audit within organisations transmuting into a tool for management. Additionally, his interpretation of the significance of Audit goes beyond this initial understanding appraising its ability to provide organisations with the mechanics to take risks which seem uncontrollable in order to diminish them considerably. Donald MacKenzie, Professor of Sociology at the University of Edinburgh has therefore declared that, “Power’s The Audit Society influentially challenged the concerns and fetishes of the 1990s…His fine new book will likewise provoke intense debate on how the societies of the new century conceive and manage risk”. Thus, it is clear that his latter book develops Power’s initial suggestions of Auditing and its prominence, presenting a more developed insight into the world of risk management. Having conveyed a very powerful interpretation of risk throughout this book, Power presents his work with the additional aim of ascertaining the debate surrounding the possibility of systematizing uncertainty entirely. Professor John Meyer therefore also praises Power’s work stating that his interpretation of “the rise of the risk management movement is striking and impressive” it has also been referred to as “…iconoclastic and illuminating”. I therefore was enticed by the opportunity of reading this book and presenting my own critique; which I aim to present within this essay.
Overall, Power presents a potent message within this book structuring it around four main themes. These themes include: the tensions that have emerged surrounding risk management and uncertainty; an analysis of the advancements made in the systems of profession; application of neo-liberal concepts of individuals to organisations and their behaviour through investigation of the dispute surrounding risk-enhancing techniques and risk-minimising actions; and the transforming impact risk management has had on organisations and their existence within the world. Catering to these four themes represents the fundamental message that risk management has been subject of debate leading to significant advancements; whereby it has ultimately became a crucial factor to operating successful organisations. Power indicates the connotation with this advancement and the removal of the traditional vulnerabilities coupled with risk; acknowledging that risk is a crucial component of accountability and authenticity therefore indicating that risk management is risk control. Power is thereby perplexing risk management and its’ ability to organise uncertainty, presenting distinct discussion of the improvements organisations are required to make with their risk management; implementing more simplistic processes through self-control.
The book contains several inspiring facts and quotes which I have collated into a small group to represent my ‘favourite’. The cherished facts in my opinion refer to the association between risk and uncertainty: “uncertainties must be organised as risks to be managed and organisations must exhibit conformity to rational risk management principles” (p.196); indicating that uncertainty must be transformed as risk and managed through risk management. Power can additionally be quoted as saying, “Risk management adds value and makes business sense” (p.157); this striking comment portrays the real importance surrounding risk management, highlighting that this can enhance business performance; conveying the real strength behind it. Additionally, Power explores risk management techniques, declaring that, “…the functionality or effectiveness of risk management is something which is not static” (p.158). As a hotly debated topic, Power’s comment here is particularly inspirational as he is acknowledging the inherent challenges organisations face during the execution of risk management as it is not a consistent process and concludes that; “Risk management systems are never perfect” (p.167). Stemming from this, he also powerfully denotes that audit has a particularly significant role to play within organisations stating that, “auditability and management are closely intertwined” (p.166). Here Power is linking audit and management highlighting their similarities through their implementation of logical direction. Thus, the strength behind Power’s statement of: “Organisations have been turned ‘inside-out’ and in the process a new kind of actor has been created which must self-consciously orchestrate its relations with other organisations” (p.193) is clear. I would therefore refer to these quotes and facts as the best from the book, whereby they effectively constitute the main message being portrayed, concluding that “organisations must now think inside out” (p.134) when embarking on this delicate process of risk management and implementing the relevant procedures to ultimately organise uncertainty.
As highlighted through the above discussion, Power expresses outstanding knowledge of the existing transformation inherent within the risk management process. Thus, through reading this iconic novel, my understanding of uncertainty and risk has widened. Most importantly I have learned about the reallocation of risk from analysis to governance and internal control systems co-operation with the internal auditors, effectively turning organisations inside out; which have become crucial elements to an organisations success. Furthermore, I have ascertained the advancement of ‘operational risk’ and ‘reputation risk’ management; acknowledging that reputational risks hold a significant weighting in the risk management process as they are now ‘measurable, visible and auditable’ and deemed as an ‘intangible asset’. Through this book I also discovered that risk management is about litigation whereby it ultimately represents an augmentation of audit; allowing organisations to demonstrate their capability of controlling their risks. This book has given me a true insight into the world of risk and the responsibility organisations must take throughout their risk management process catering to neo-liberalisation. The difficulty in achieving perfect risk management however, is also reflected, whereby I have learned that seeking for perfection in the risk management process has negative impacts as Power indicates that we cannot completely organise all uncertainties we face.
Nevertheless, not everything within this book should be taken at face value. For example, Power’s (2009) later article ‘The Risk Management of Nothing’ contradicts his 2007 book. This article was published in the wake of the financial crisis; deeming the risk management of everything to be irrelevant whereby his findings indicate that the opposite is true and this risk management has effectively been the risk management of nothing (Power, 2009). Thus, it can be drawn that Power’s initial proposition of enterprise risk management is illusory and is not as strong a solution as initially portrayed; “ERM may be more symptom of where we have been rather than the cure for the future” (Power, 2009). Personally, I also disagree with Power’s assumption that the ability of risk culture mechanics are limited, whereby they are only useful when it is at the centre of managerial and regulatory attention and are unable to be used as point of reference within organisation targets. I believe that in order to truly engage in total risk management, organisations must alter their inherent culture to reflect their risk appetite in addition to catering to risk culture through management and regulation.
Not only does Power present knowledge to the reader of the shift from risk analysis to risk governance but this novel also indicates that there are specific requirements professions should take in response to this change. Reflecting upon this it is clear that in order to effectively respond to the changing risk agenda, accountants should generally strive to align risk with responsibility in order to convey the authority of risk. Risk has ultimately advanced from something to avoid, transforming into part of a successful operation whereby it has become relevant to strike a balance between those beneficial risks and general risk management. Audit procedures must therefore develop to reflect the inherent risk culture within organisations and it should no longer concern the reduction of risks but rather assess the organisation’s risk culture and structure the audit around the effectiveness of their risk management techniques.
Having acknowledged the significant contribution that Power has had within this book to the accounting industry; my understanding of accounting has consequently transformed - specifically reflecting on the relationship in existence between risk management and audit. My knowledge of what accounting is and what it can do has developed through recognition that accounting is a crucial component to organisations in several different formations. I have discovered that risk management represents an additional component of audit culture whereby Power has encouraged me to think of accounting not as a purposeful field but as a key contributor to delineating what organisations are. This details accounting as a source of describing the boundaries of an organisation and where they lie; outlining the exact actions organisations should take.
In conclusion, I have found this book truly inspiring and powerful through the distinct interpretation Power makes of risk and uncertainty coinciding with accounting. Overall this book has demonstrated the real importance of understanding risks in order to achieve the desired risk management – something which we all engage in on a daily basis; denoting the significant contribution of this book to today’s society. Additionally, this book presented what I believe to be a compelling argument surrounding the relationship between risk and accountability; before reading this book my knowledge of this was limited. Overall, I believe it exemplifies the importance of risk management and accounting; giving clear explanation of the advancements which have been made signifying how to respond to them.
Power, M.K. (2007). Organised Uncertainty: Designing a World of Risk Management. London: Oxford UP
Power, M.K. (2009). The Risk Management of Nothing. Accounting, Organizations and Society, 34 (6/7), 849-855.