Principles-based risk regulatory reforms and management control practices: a field study
Accounting, Auditing & Accountability Journal
ISSN: 0951-3574
Article publication date: 14 September 2022
Issue publication date: 4 April 2023
Abstract
Purpose
Government reforms have seen shifts from rules-based to principles-based risk regulatory governance. This paper examines the effects of principles-based risk regulatory reforms on public sector risk management (RM) and management control practices in public sector organizations (PSOs).
Design/methodology/approach
The principles-based regulation focuses on providing autonomy to PSOs while maintaining control over their actions without direct intervention. This resonates with Foucault's notion of how modern forms of governments operate. The research is informed by Foucault's concept of governmentality. The authors conducted a qualitative field study of an Australian PSO, gathering and analysing data from interviews, focus groups, and archival documents.
Findings
The findings show the capillary modes by which principles-based risk regulatory regime penetrates and works with management control practices in pursuit of regulatory goals within the PSO the authors studied. In addition, the authors find that the principles-based approach (focusing on autonomy) and rules-based approach (focusing on control) are not opposites in kind and effect but rather, autonomy should be understood as a central pillar of control. Furthermore, the findings show how cultural controls and formal controls are not in conflict but are interconnected in RM practices, with cultural controls providing control architecture for RM and formal control translating the control architecture into routines. Finally, the study provides insights into how enterprise risk management (ERM) provides capabilities for and routinizes RM practices in a PSO and the management control systems (MCS) that enabled this to occur.
Originality/value
The paper provides novel insights into how MCS are infiltrated, mobilized and deployed to enact principles-based risk regulatory reforms. These insights are useful for regulators, practitioners and researchers.
Keywords
Acknowledgements
The authors would like to thank Professor Lee D Parker, Professor James Guthrie and the two anonymous reviewers for their support and helpful comments. The authors gratefully acknowledge constructive feedback from Professor Lukas Goretzki and 2021 Accounting Seminar participants at the Stockholm School of Economics, Sweden, and 2019 APMAA conference participants at Qatar University, on the earlier drafts of the paper. The authors also acknowledge research support received from Dr Mark Cloney and the award of a research grant under the Research Focus Area scheme from La Trobe University in 2018, where one of the authors of this paper was based at the time. The authors would like to graciously thank the management and staff of the public service organization, “Superservice”, for their time during the collection of the data for their field study.
Citation
Mahama, H., Rana, T., Marjoribanks, T. and Elbashir, M.Z. (2023), "Principles-based risk regulatory reforms and management control practices: a field study", Accounting, Auditing & Accountability Journal, Vol. 36 No. 3, pp. 773-800. https://doi.org/10.1108/AAAJ-10-2020-4983
Publisher
:Emerald Publishing Limited
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