CPA 162-1 “So many risks, so little time”: a study of the framing of de-risking
techniques
Discussant: Dr Helen Oakes, University of Sheffield Management School
Summary
The paper discusses how actuaries motivate their clients (pension plan sponsors) to adopt
new risk-objects and purchase their de-risking services and how such selling strategies are
sometimes resisted by clients. One example of a new risk object identified by actuaries is the
increased volatility claimed from recent changes to pension accounting standards away from
smoothing gains and losses on the balance sheet to market valuation approaches and
immediate recognition of losses. The authors analyse 23 interviews involving actuaries and
their clients. They draw on framing theory to understand how the meaning of the new risk
object is negotiated between actuaries and their clients. Framing theory presents the issue of
risk in the following stages: a problem is diagnosed, solutions are presented (prognosis) and
attempts to motivate action are introduced. The authors provide an example of the framing
stages through a tabular analysis of promotional material used by actuaries. They suggest
that this shows ways in which risk is co-constructed and negotiated with pension plan
sponsors. The authors contribute to the accounting literature on risk management by
developing new theoretical concepts of “frame overload” and “diffraction” (multiple
interpretations of risk management). Frame overload and diffraction occur when risk and derisk take on multiple meanings for actors. For example, HR professionals identify qualitative
risks such as governance and employee wellbeing in response to pension issues, rather than
accepting the purely financial frame of risks identified by actuaries. Furthermore, internal
client financial professionals try to populate the frame by offering their own financial
solutions as alternatives to those proposed by actuaries. Frame overload includes 30 pension
risks identified by actuaries. The authors argue that frame overload potentially reduces the
effectiveness of the framing strategy. Thus, the authors find that the diffusion of new risk
objects and de-risking strategies is not entirely unproblematic as extant literature would
typically suggest.
Main Comments
The research is topical, particularly in the light of attempts in the UK to reduce pension
commitments in the USS university scheme and provides an interesting application of
framing theory to the relationship between actuaries and their clients.
Some sections are too long and repeat earlier material. For example, the discussion in the
section on the social construction of risks and risk management is well rehearsed and could
be reduced. There is some minor repetition in the theoretical framework section and the
earlier references to this material could be reduced. The statement of the contribution is
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repeated several times. The first few paragraphs of the discussion include material that
should be included in the methods section and introduction.
The inclusion of a description of the findings that are summarised in the tables would be
helpful to the reader and would strengthen the paper because this is a major part of the
findings.
The way the concepts of frame overload and diffraction are applied could be distinguished
more clearly.
The authors argue that frame overload and diffraction have the potential to reduce the
effectiveness of the financial frame offered by the actuaries. However, it is surely more than
the volume of ideas in the frame that could potentially reduce its effectiveness. The authors
could also consider the content of those alternative arguments presented by clients, the roles
of actuaries and the broader context of risk management.
The social constructionist perspective of risk described in the paper suggests at times that risk
is conceptualised as a pure fabrication or fantasy. This does not seem entirely plausible. Yet,
the accounting changes outlined in the introduction (p2) are described as producing increased
volatility which seems to suggest a real issue with real consequences. Thus, the explanation
of social constructionism in relation to risk requires more attention to avoid a sense of
inconsistency.
The conceptualisation of risk as a socially constructed fantasy may explain why the content
of the alternative notions of risk presented by the clients is not regarded as important to the
authors when they add two new volume-based concepts to framing theory.
The analysis of interviewee’s comments could at times be more detailed to clarify the
meaning and the reason for their inclusion.
Minor comments
It would be helpful if it was clear in the text who was speaking – actuary or client.
A section explaining the context of the construction of the new risk object of increased
balance sheet volatility may help to develop understanding of the broader context. The
section could outline whether and how actuaries have been involved in promoting recent
pension accounting changes and the nature of their relationship to accounting standard setting
for pensions. This would help to clarify the role of actuaries in constructing their meaning of
a new risk object. It would indicate whether actuaries are merely responding
opportunistically to an issue of volatility created elsewhere, or whether they have been
instrumental in manufacturing increased volatility. The latter would be more consistent with
framing theory where the notion of risk held by the actuaries might be co-constructed with a
range of actors before actuaries attempt to frame the issue for sponsors.
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The sentence ‘New frames sometimes fail to be adopted because frames cannot be imposed
on others’ p3 seems rather sweeping. It could be qualified by stating the reasons why frames
cannot be imposed in this particular context.
P13 last sentence. It might be preferable to write ‘The more experientially commensurable
(or congruent) and central (or significant) the framing efforts are perceived to be, the more
likely…’
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