Becoming comfortable with saying yes - a study on risk management and decision-making in a state pension fund
Abstract: Risk management has in recent decades shifted from a concern for financial risk to including a plethora of risks that can adversely affect an organization. One of the categories of risk that has risen in relevance is operational risk, a category many organizations struggle to make sense of, not least due to its qualitative nature. However, the in-depth understanding of the management of operational risk is limited. This thesis therefore studies a state pension fund's practice for managing operational risks associated with private market investments. Operational risks are tangible in these investments due to the pension fund's reliance on external management. We draw on theoretical concepts of comfort theory to explain how the risk practice aims to create organizational comfort around complex decisions. What proved to be central in the activities of the risk practice are the social interactions between internal subject experts and decision-makers to discuss, challenge, and validate held perceptions. We conclude that the operational risk practice is characterized by a search for organizational comfort, which is found by conducting the risk assessment as a collaborative effort. The horizontal and vertical transfer of comfort amongst the actors involved in the practice is what ultimately support decision-making. In contrast to previous research, our study demonstrates how a risk practice can be integrated, credible, and influential also without relying on dedicated risk experts and technical risk management tools.
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