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Comprehensive Opportunity and Lost Opportunity Control Model and Enterprise Risk Management

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Book cover Management, Uncertainty, and Accounting

Abstract

The purpose of this chapter is to build a comprehensive opportunity and lost opportunity control (COLC) model through which contemporary management accounting can act in alignment with enterprise risk management, as well as to examine its managerial and socioeconomic functions in relation to risk management in the context of uncertainty in a global finance–oriented society. For this purpose, the chapter demonstrates the structure and characteristics of this model specifically in contrast with traditional and other control models that have been previously addressed for controlling the changes and diversity of business environments. The chapter can recognize from this demonstration that the accounting control system based on opportunity and lost opportunity control model has shifted its fundamental focus from feedback systems, profitability, and managerial control to feed-forward, value creation, and enterprise governance. This chapter also refers to the socioeconomic function that the model fulfills in the disclosure and transparency of the risk management process. These results lead to the conclusion that contemporary management accounting expands its short-term efficiency and company-centered effectiveness into long-term efficiency and social effectiveness.

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Notes

  1. 1.

    A holistic approach is one that assesses, explores, monitors, and controls risks from all sources of an organization in more integrated and comprehensive manner than do piecemeal approaches (Leung and Isaacs 2008; Clarke and Varma 1999; see also Stockstrom and Herstatt 2008; Abrams et al. 2007).

  2. 2.

    Improvement is used as an inclusive means that shows ameliorative and alternative response to profit opportunity and risk variances. Concretely, it clears up their factors and causes, and takes measures to raise the probability of profit opportunities and to lower the risk likelihood. The situation of strategic innovations is modified or altered for profit opportunities, while avoidance (such as buying insurance), compensation (agreement), or dissolution (cooperation) is considered for risk. At the same time, organizational structure and opportunity/risk consciousness among constituents in the organization must be improved, and risks must be kept from triggering risks in other areas (Dickinson 2000; COSO 2004; Clarke and Varma 1999; Leung and Isaacs 2008; Arena et al. 2010). Although Kaizen (improvement) in Japanese means activities which inspect and reexamine all product factors and production process for proactively manufacturing high quality/function and low cost into a product, here it takes in a broader sense, including the reexamination of strategy and innovation process.

  3. 3.

    Here, ‘large companies’ means companies whose capital stock is more than 500 million yen and whose liabilities are more than 20 billion yen. For details about the Company Act, the Financial Instruments and Exchange Act, and auditing standards in Japan, see ‘regulations’ in Data and Materials from Websites. As for Japanese National Laws, see the following; Minister of Justice: Japanese Law Translation: http://www.japaneselawtranslation.go.jp/?re=01; Financial Instruments and Exchange Act (Tentative translation): http://www.japaneselawtranslation/go.jp/law/detail_print; Companies Act (Part V, Part VI, Part VII, and Part VIII): http://www.japaneselawtranslation/go.jp/law/detail_print; Business Accounting Council, 2009, Opinion on the Revision of Auditing Standard, April 9, Financial Service Agency, The Japanese Institute Public Accountants: http://www.fsa.go.jp/en/news/2009/20090525-1/01 pdf

  4. 4.

    The ‘unified management statement of profit opportunity and risk’ and the risk management report are only examples to heighten the quality transparency of comprehensive risk management. A more exhaustive and easy-to-understand report of risk management is contrived by using the basic framework of the statement, even when it includes more complicated conditions.

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Authors and Affiliations

  1. Beppu University, Beppu-city, Oita, Japan

    Akira Nishimura

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  1. Akira Nishimura
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Nishimura, A. (2019). Comprehensive Opportunity and Lost Opportunity Control Model and Enterprise Risk Management. In: Management, Uncertainty, and Accounting. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-8989-3_8

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