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Title: Risico in de lucht. Een case study naar factoren die Enterprise Risk Management inrichting beïnvloeden bij de Koninklijke Luchtvaart Maatschappij N.V.
Authors: Wijlick van, GFY
Keywords: airline
airline industry
case study
contingency theory
corporate governance
Enterprise Risk Management
Management Control System
New Institutionalism
Old Institutional Economics
risk management
Issue Date: 1-Nov-2016
Publisher: Open Universiteit Nederland
Abstract: This research examines the factors affecting the Enterprise Risk Management (ERM) configuration at a specific company, namely KLM Royal Dutch Airlines. ERM is part of the control package a company employs in its quest to fulfill its organisational goals. Considering historic findings regarding management control systems (MCS), it is not a surprise that previous research has indicated that ERM configuration differs amongst companies. This has also found to be the case at airlines. However, since research regarding ERM in organisations is still in its infancy, especially at non-financial companies, a further inquiry seems appropriate. Therefore, this research looks in a more detailed manner at ERM configuration by zooming in on the way the company employs ERM principles in managing its short term business risks. The question this research tries to answer is which factors influenced and still influence this configuration. Using contingency theory, New Institutionalism and Old Institutional Economics as theoretical guidelines, an exploratory quest is set out to discover those factors. The case study was determined to be the appropriate research method regarding the research question and unique access to the case study organization. Interviews and the review of documents were the techniques used for this research. The findings show the configuration of ERM regarding short term business risks and, as expected, a wide variety of influencing factors. The configuration appears to be driven by the rationalities of strengthening management control and corporate governance. It is used for internal discussions and organisational learning, with management and (non-) executive directors enjoying its benefits. Specifically the Internal Audit department has a stake and say in the reporting process as it uses its outcome for its own audit planning. The case study organization was found to have multiple risk appetites, a pragmatic qualitative approach to identifying, defining and aggregating risk and continuously executing the risk management cycle in a coordinated effort regarding the actual management of risks. Furthermore, the reporting process was found to take place four times each year, focusing on the downside of risk and using basic risk matrices. The configuration is driven by the inherent difficult quantifiable nature of most business risks, strong competition in the airline industry, size of the company, the interdependent nature of the company’s activities, institutional pressures in the form of legislation and governance codes, influence from internal departments or professions and established organizational routines. The results echo those of previous case studies of ERM application in organizations. They therefore strengthen the results of problem driven research regarding this topic. However, this is the first research examining ERM application on a detailed level and in a Dutch airline. It therefore is an addition to the established body of knowledge. The results aid in understanding organisations not as mere economic constructs, but as social constructs as well. Managers could benefit from knowing this by configuring or tweaking means of control. Further research could focus on the ‘fit’ between ERM configuration and drivers and the way ERM configuration evolves in an organization.
Appears in Collections:MSc Management Science

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