Enabling Effective Operational Risk Management in a Financial Institution: An Action Research Study

Abstract

Action research (AR) is significant for its promise to bridge the chasm between rigor and relevance by seeking to solve real-world problems while building scientific knowledge. In this spirit, in our research project, we argue for a return to the essence of AR—that is, focusing on problem, action, and reflection. Adopting the style of AR known as dialogical AR, we address the issue of operational risk management as encountered by a financial institution in Taiwan. In this AR project, the researchers work collaboratively with workers in a bank to manage the knowledge creation process as part of an operational risk management program. Through three AR cycles, our findings demonstrate that ongoing knowledge creation facilitates the transformation of existing organizational culture and helps practitioners to identify different types of operational risks. We also highlight the conditions under which insights from reflective dialogues between practitioners and researchers can encourage managers to open themselves to new and different ways of thinking and acting. Finally, we offer principles for undertaking effective dialogical AR.