Managing Risk as a Duality of Harm and Benefit: A Study of Organizational Risk Objects in the Global Insurance Industry

AuthorRebecca Bednarek, Konstantinos Chalkias, Paula Jarzabkowski
Publication Date01 Jan 2021
British Journal of Management, Vol. 32, 235–254 (2021)
DOI: 10.1111/1467-8551.12389
Managing Risk as a Duality of Harm and
Benef‌it: A Study of Organizational Risk
Objects in the Global Insurance Industry
Rebecca Bednarek, Konstantinos Chalkias 1and Paula Jarzabkowski2,3
Victoria University of Wellington, Wellington, 6012, New Zealand, 1Birkbeck, University ofLondon, London,
WC1E 7HX, UK, 2Cass Business School, City University of London, London, EC1V 0HB, UK, and
3University of Queensland, Brisbane, 4072, Australia
Corresponding author emails:;;
This study examines howorganizations construct and manage risk objects as a duality of
harm–benef‌it within their normal operations. It moves beyondthe existing focus on acci-
dents, disasters and crisis. We study the risk-transferprocesses of 35 insurers where they
navigate the tension of retaining risk in their insurance portfolio to increasethe benef‌it of
making prof‌it and transferring risk to reinsurance to reduce the harm of paying claims.
We showthat organizations’ constructions of risk are underpinned by everydayrisk man-
agement practices of centralizing, calculating and diversifying.Through variation in these
practices, not all organizations seek balance and we in turn uncover the sensemaking pro-
cesses of abstracting and localizing that enable organizations to prioritize harm or bene-
f‌it. This contributes to the risk literature by illuminating the co-constitutive relationship
between risk sensemaking processes and everydayrisk management practices. Following
the complex linkages involved in the construction of risk objects as sources of harm–
benef‌it, our analysis also contributes to the literature on dualities. It shows that while
immediate trade-os between harm–benef‌it occur, prioritizing one element of the dual-
ity is ultimately a means for attaining the other. Thus, while initial imbalance is evident,
prioritization can be an enabling approach to navigating duality.
All authors contributed equally to this work.
We wouldlike to thank Editor Professor Pei Sun and the
anonymous reviewersfor their constructive feedback dur-
ing the review process.We also thank Yuval Millo, Anette
Mikes and other participants at the Cass Constructing
Financial Risk Workshop, April 2015 and colleagues at
EGOS 2015 and AOM 2016 for their helpful comments
on earlier drafts of this paper. The authors acknowledge
support from the following grants: Economic and So-
cial ResearchCouncil (grants ES/K00926/1; RES-186-27-
0020; RES-173-27-0163), British Academy of Manage-
ment (grant SG091192), Insurance Intellectual Capital
Initiative, Worshipful Company of Insurers and Lloyd’s
Tercentenary Foundation.
Organizations produce, evaluate and manage risks
(Hardy and Maguire, 2016; Scheytt et al., 2006).
Yet few studies explore how risk is constructed
and managed within organizations (Gephart, Van
Maanen and Oberlechner, 2009; Maguire and
Hardy, 2013), as existing research primarily fo-
cuses on ‘extreme’ organizationalsites of accidents
and disasters (Brown, 2004; Gephart, 1993; Leve-
son et al., 2009). We need to move beyond extreme
cases to study the benef‌it – not just the harm –
of risk-taking activities (Bromiley, 1991; Geppert
et al., 2013) inherent in everyday risk manage-
ment (Power, 2016). How organizations navigate
risk-taking and risk-reduction activities in their
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236 R. Bednarek, K. Chalkias and P. Jarzabkowski
everyday risk management practices is critical
to their sustainability and avoiding crises in the
wider societal systems in which they participate
(Palermo, Power and Ashby, 2017; Power, 2016).
In response, this study exploreshow organizations
construct and manage risk objects (Boholm and
Corvellec, 2011; Hilgartner, 1992; Maguire and
Hardy, 2013) as a duality of harm–benef‌it within
their normal operations (Bourrier, 2002; Palermo,
Power and Ashby, 2017; Power, 2014, 2016).
Our qualitative examination of risk transfer in
multiple insurance organizations provides a theo-
retically salient context for this study due to the
entanglement between harm (potential for large-
scale losses) and benef‌it (prof‌its accruing from
risk-taking) involved in trading risk. To manage
uncertain losses following large-scale disasters, in-
surers pay a premium to transfer a portion of risk
in those portfolios to reinsurers. A study of this
risk-transfer process enables a nuanced analysis of
how the duality of risk is navigated. Namely, pro-
tection through risk transfer focuses on harm min-
imization, yet also reduces the potential benef‌it as
it comes as a cost. Increasing benef‌it by retaining
the risk themselves as a source of prof‌it is thus in
tension with reducing harm by transferring risks to
reinsurers. We focus on how insurers navigate the
duality of harm–benef‌it.
We develop a framework that shows how
organizations construct and manage risk objects
as a duality of harm–benef‌it within their normal
operations. We f‌ind considerable variation in how
organizations construct and manage the duality
of risk. Surprisingly, not all organizations seek to
simply balance harm–benef‌it. Some organizations
explicitly prioritize risk transfer (to reduce harm)
while others explicitly prioritize risk retention
(to increase benef‌it). This variation is explained
through three risk management practices: cen-
tralizing, calculating and diversifying practices.
In turn, these practices unfold within two distinct
sensemaking processes about the duality of risk:
abstracting and localizing. Drawing on the risk-
object framework and its focus on how causal
links to harm are socially constructed (Elliott,
2019; Hilgartner, 1992), our analysis surfaced
weak, strong and outcome links to the construc-
tion of harm and benef‌it within these sensemaking
processes. In doing so, harm and benef‌it form a
unif‌ied interdependent whole, even as they remain
contradictory elements within organizations
(Putnam, Fairhurst and Banghart, 2016). Our
analysis explains a complex dualistic relation-
ship, whereby constructing and managing risk
objects always entails a dynamic entanglement of
harm and benef‌it, even where one or the other is
The resultant framework contributes to the lit-
erature on the social construction of risk within
organizational theory (e.g. Maguire and Hardy,
2013; Palermo, Powerand Ashby, 2017). We move
beyond the existing focus on disasters and acci-
dents to explain the normal operations through
which organizations manage risk as a duality. In
doing so, we also extend research on sensemak-
ing about risk (Gephart, 1993; Weick, 2010) and
managing organizational dualities (Farjoun, 2010;
Putnam, Fairhurst and Banghart, 2016).
Theoretical framing
Organizational risk objects
This study draws on organizational scholarship
showing that risk is socially constructed (Gephart,
Van Maanen and Oberlechner, 2009; Miller, 2009;
Tierney, 1999). We build on the ‘risk objects’ con-
cept (Hilgartner, 1992; Maguire and Hardy, 2013);
an explicitly organizational framework that fo-
cuses analytically on the practices within organi-
zations. In doing so, we shift attention from cul-
ture and society (e.g. Beck, 1992; Douglas, 1986;
Giddens, 1999; Tsoukas, 1999) and individual-
level cognition and decision-making (e.g. Holt,
2004; Mitchell, 1995; Stein, 2000) in relation to
risk, to focus on the less-studied aspects of or-
ganizational work and interaction (Power, 2014,
The risk-object framework examines how ob-
jects are constructed as risky through processes
of social construction that causally link them
to specif‌ic harms (Maguire and Hardy, 2013;
Samsonova-Taddei and Humphrey, 2015). The
dominant focus within organizational research
has been on the construction of risk through man-
agerial sensemaking and perception (e.g. Gephart,
1993; Roberts, Madsen and Desai, 2007; Weick,
2010; Winch and Maytorena, 2009). Such research
has explored how sensemaking breakdowns cause
accidents (Weick, 2010; Weick and Roberts,
1993) and sensemaking processes post-disasters
(Gephart, 1993; Topal, 2009). For example, in
high-reliability organizations that avoid such
harmful disasters and crises, sensemaking involves
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