Angela Pike-Bowles *
Department of Applied Management, Administration and Ethical Leadership, University of Fort Hare, South Africa.
Juliet Townes
Department of Applied Management, Administration and Ethical Leadership, University of Fort Hare, South Africa.
In this post, we present a brief overview of our recently published book chapter titled “A Qualitative Exploration of Risk Management Strategies in Family Businesses”
This study adopted agency theory. This theory seeks to explain the complex relationship between business owners (the principals) and business managers (the agents). Behavioural agency theory further establishes the connection between leaders and managers and their decision-making within the business. The theory examines potential conflicts of interest that may arise between principals and agents because of their differing goals and risk preferences. In this regard, it assists managers in analysing the business’s strengths and weaknesses, as well as in monitoring and identifying risks.
Agency theory is applied in this study because it recognises agency-related risks in family businesses and their potential influence on risk management (RM) mitigation strategies. Understanding these risks enables family businesses to develop RM techniques and systems that ensure appropriate risk assessment and mitigation. Moreover, RM can influence managerial behaviour in terms of both risk-taking and risk-averse decisions.
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