ERM

Defining Risk in Management Research

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Abstract: A major problem in the field of management has been the wide variety of definitions that have been proposed. To resolve the resulting terminological confusion, a conceptual review that considers the many ways in which risk has been defined in the management literature was conducted. Our findings highlight some disagreement in the management literature associated with the definition of risk. The review identified four distinct groups of risk definitions: (1) risk as outcome uncertainty, (2) risk as probability of (unwanted) outcomes, (3) risk as variability in outcomes, and (4) risk as unwanted outcomes (that may or may not occur).

Authors: Jonas Stromfeldt Eduardsen, Svetla Trifonova Marinova, Oded Shenkar, Simcha Ronen

Date: March 2, 2018

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On the Tension between Product Performance and Confidentiality Protection

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Abstract: The general consensus of the academic literature on product development is that it is best to be centrally located in the network of firms in the industry. This allows faster access to more and better information and knowledge. The degree to which a firm is centrally located in a network (i.e., its network centrality) has been shown to relate to various positives outcomes, including increased product development speed and better products. The product development literature also argues that the degree to which a focal firm’s partners are NOT directly tied to each other can enhance the novelty of products developed by the network. The outsourcing and offshoring of activities has led to a world in which product development work has become increasingly distributed. Further, the increasing digitization of work has led to a world in which the digital assets exchanged between product development partners are increasingly important. The main thrust of our research was to understand whether, in the context of the development of a digital product, the established benefits of network centrality may not have a downside. Specifically, does network centrality relate to an increased risk of a confidentiality breach?

Authors: Yingchao Lan, John Gray, Aravind Chandrasekera, and Brett Massimino

Date: October 15, 2018

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The Use of Multiple Risk Management Strategies: Evidence from the Natural Gas Industry

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Abstract: Starting in 1978 and continuing throughout the 1980s, natural gas pipelines faced a series of regulatory changes, including price deregulation, which changed their exposures to price and quantity risk. We exploit this unique environment and examine cross-sectional and time-series patterns in the use of multiple risk management strategies by pipeline companies. Natural gas pipelines use a combination of such strategies, including gas storage, cash holdings, line-of-business and geographic diversification, and commodity derivatives to hedge their increasing risks. Gas storage shows a complementary relation to holding cash and using derivatives to mitigate these risks. However, differences in the financial characteristics of derivatives hedgers and storage hedgers suggest that firms use derivatives to manage price risk and store gas to manage volume risk. Derivatives hedgers are similar to firms that diversify. In addition, firms that engage in hedging activities have smaller and less variable sensitivities to price changes than firms that do not, especially post-deregulation.

Author: Christopher C. Géczy, Benadette A. Minton, Catherine Schrand

Date: May 11, 2006

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