Calculating for managing: The emergence of the idea of risk management
| Autor | Alejandro Morales Henao |
| Cargo | Master of Arts in Global Political Economy. Political Scientist |
| Páginas | 78-93 |
ABSTRACT
This text argues that the emergence
of the idea of risk management can
be traced down to the use of deriva-
tives in the financial sector in the early
1970s. Critically engaged with Michael
Power’s approach on rise of risk man-
agement as a common organizational
practice in the 1990s, the article main-
tains that risk as manageable matter
can be traced back to the use of Black-
Scholes-Merton model for pricing
options in the Chicago Board Options
Exchange (cboe) since 1973. Ideas of
calculation, measurement, and man-
agement of risk can be detected at this
point. This is an exercise of theorization
that aims to identify the role of ideas in
the economic practices so as to allow a
historicization of technical knowledge.
Keywords: Calculation, Derivatives,
Financialization, Management, Risk.
* DOI: https://doi.org/10.18601/16577175.n21.06
1 Master of Arts in Global Political Economy. Political Scientist. E-
mail: alejomh_91@hotmail.com.
CALCULATING FOR MANAGING: THE EMERGENCE OF
THE IDEA OF RISK MANAGEMENT*
CALCULAR PARA ADMINISTRAR: EL SURGIMIENTO DE
LA IDEA DEL MANEJO DEL RIESGO
Alejandro Morales Henao1
RESUMEN
Este texto argumenta que el surgimiento
de la idea del manejo del riesgo puede
rastrearse en el uso de las derivadas
en el sector financiero a principios de
los años 70. A través de una discusión
crítica con la propuesta de Michael
Power sobre la consolidación del
manejo del riesgo como una práctica
organizacional común en los años 90,
el artículo afirma que el riesgo como
asunto administrable se remonta al
uso del modelo Black-Scholes-Merton
para fijar los precios de las opciones en
el Chicago Board Options Exchange
(cboe) desde 1973. La idea de cálculo,
medición y manejo del riesgo se pu-
eden situar hasta ese momento. Este es
un ejercicio de teorización que busca
identificar el papel de las ideas en las
prácticas económicas, de tal manera
que se permita una historización del
conocimiento técnico.
@puntes cont@bles n.º 21 – mayo de 2018 – pp. 73-88
74 Alejandro Morales Henao
@puntes cont@bles n.º 21 – mayo de 2018 – pp. 73-88
Palabras clave: Cálculo, Derivadas,
Financiarización, Gestión, Riesgo.
“Can we know the risks we face, now
or in the future? No, we cannot; but
yes, we must act as if we do.”
(Douglas and Wildavsky, 1982)
INTRODUCTION2
The idea of risk has become popular,
although its definition and scope is not
clear. It can be associated with harm
and danger, as well as with opportu-
nity. Nonetheless, whatever risk refers
to, its uses in today’s society depict an
important process of reflection about
how to deal with it. This paper attempts
to understand the emergence of risk
management in the 1990s as a popular
practice among organizations, shedding
light on the importance of risk as an idea
that regards the world as amenable to
human decision and intervention.
As Michael Power (2007) argues, to say
that the future is unknowable or, in the
same way, trying to find a singular defi-
nition of risk (of uncertainty, as well)
maybe is trivial, but asking for “the
historical and social conditions under
which organization come to embody
imagined contingent outcomes as ob-
jects of management practice” (Power,
2014), is not. In other words, it is more
fruitful to question about social condi-
tions in which an idea of risk is estab-
lished and how different actors (in this
case, organizations) deal with it, than
to put the efforts in building a general
idea of what risk is. In this sense, this
text proposes a history of how risk be-
came something measurable, calculable
and manageable. Critically engaged
with Michael Power’s proposal about
the emergence of risk management as
a common organizational practice in
the 1990s, I argue that the idea of risk
management can be traced down to the
use of derivatives in the financial sector
in the early 1970s.
The increasing role of finance in the
economy and in daily life (Navarro and
Torres, 2012; Van der Zwan, 2014), in
general, is partially explained by the
spreading use of derivatives in finance.
The so-called financialization3 process
2 This paper was presented as a final assessment of the Political Eco-
nomy of Global Finance course, part of the master in Global Political
Economy at the University of Sussex. This was funded by the British
Council Chevening Scholarship. I would like to thank Prashant Kumar
and Samuel Knafo for their thoughtful and accurate comments.
3 Despite this paper uses the context of “financialization” in order to
explain the emergence of risk management as a popular practice, it is not
about that phenomenon. It is complex and the increasing literature that
are focused on make it even more. As Epstein (2005) contends, “there
is not even common agreement about the definition of the term,” yet, it
is essential to consider some analysis. In the introduction to the special
issue of Socio-Economic Review, Kornich and Hicks (2015) briefly
expose a myriad of consequences of financialization on inequality,
economic growth, labour market, and household’s culture. Deutschmann
(2011), from a sociological perspective, considers financialization as
a hegemonial regime of financers over entrepreneurs. For Lapavitsas
(2011), financialization not only encompasses a shift in which large
corporations acquired independent financial skills and banks have turned
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