Building adaptive capacity: The role of advanced analytics in risk management

Abstract

In this study, we theoretically argue for a potential trade-off between risk information integrated into the strategy and the use of advanced analytics for risk management purposes with regard to the adaptive capacity of organizations. Furthermore, we investigate whether the adoption of an advanced analytics strategy helps overcome this suggested substitutive interrelationship by giving direction and communicating a clear strategic focus to employees, including senior management. To test our hypotheses, we collected survey data in summer 2020 from 174 non-financial companies that allows us to exploit the challenging setting of the Covid-19 pandemic for organizations and their risk management. Our results support both the substitutive relationship between strategy integration of risk management and the use of advanced analytics for risk management purposes, as well as the three-way complementarity between the two risk management design choices and advanced analytics strategy with regard to adaptive capacity. Thus, we contribute to the literature with new insights into the potential benefits of linking risk management practices to business intelligence and analytics in light of better decision-making and control.