Implementing Risk Governance: A Levers of Control Approach

Our reflections show how the LoC might serve as a means for institutionalizing risk governance as “an overarching philosophy of controlling strategic business risk” (Stein et al. 2019, 1229). Via the LoC top managers monitor their firm’s core values, risks to be avoided, critical performance variables, and strategic uncertainties and, thus, manage their firms despite the many risks that they face. To this end, top managers have to systemically implement the four LoC, carefully calibrating how they use each lever. To aid managers in this task, more (empirical) risk governance research is needed. To date, a sizeable literature exists that defines risk governance and relates it to risk management and corporate governance. However, fewer studies – and even fewer empirical ones – address how risk governance might actually be achieved in different contexts. As we have shown conceptually, the LoC may help top managers to institutionalize risk governance. Therefore, future empirical research should study how MCSs, such as the LoC, contribute to risk governance.