Professor Rajiv Banker and Colleagues Receive Chartered Public Accountants (CPA) of Canada and Canadian Academic Accounting Association’s Research Grant

Professor Rajiv Banker and his Canadian colleagues Professor Mark Anderson, Professor Murray Lindsay and PhD student Vicky Ma have received a research grant for the period 2016-2019 from CPA Canada and CAAA. This grant supports research projects related to the accounting profession, such as accounting information systems, accounting education, auditing, taxation and other financial and managerial accounting areas. Projects selected for the grant are those deemed most likely either to yield reports that may guide accounting practice or to prompt further academic inquiry.

The research team received the grant for their research project titled “Strategic Adaptation and Risk Management in the Oil and Gas Industry”, a proposed study which seeks to learn how strategic decision-making and the underlying management control systems supporting it evolve in response to increasing levels of environmental uncertainty. The research proposal argued that the Canadian oil and gas (O&G) industry provides a rich setting for examining how companies have developed management control systems to meet this challenge. While the O&G industry is accustomed to cyclicality, the price variations in the past ten years have been unusual in terms of causes, uncertainty, sharpness, duration, differences between oil and gas markets, and impact on companies. Environmental concerns, alternative energies, new technology, emerging economies, and several other factors are changing the industry landscape rapidly. Such industry changes have generated an increased awareness of risk management considerations connected with strategic adaptation. The research will involve in-depth study of companies in the O&G industry to learn how strategic decision-making and the underlying MCS supporting it are evolving in response to the increasing levels of environmental uncertainty that have transpired over the last ten years. This research project builds on accounting-related organization theories and literature to support the research design.

The research team observes that management education, training and control continues to be defined and taught largely in terms of the process a company uses to implement or execute its strategy based on the view that strategy is a given. Insufficient consideration has been given to the other side of the strategy coin: how MCS can be designed or modified to facilitate strategic adaptation. The team’s research suggests that competition (and strategy) can no longer be conceived only in traditional ways based on price, costs, marketing and incrementally improved products and services formulated in terms of the current environment.  The forces of creative destruction – new ideas in the form of technologies, customers, sources of supply, industries and types of organizations – proceed at a pace and scale that is difficult for existing companies to respond to effectively. Consequently, the research team argues that the formal consideration of risk management needs to become an inherent and formal part of the theory of control as it relates to strategic adaptation, particularly for firms whose strategic posture must depart from the classical view when the underlying assumption of predictability does not apply.  The Canadian oil and gas industry provides a copious setting for examining this issue. Insightful analysis of rich data from the oil and gas industry is expected from field interviews, inter-firm comparisons and the incorporation of practical components of importance to senior managers.  This research promises to help advance existing theories of management control systems. In addition, Professor Banker is currently exploring related ideas concerning competition and uncertainty as they apply in several other industries, including hotel management and real estate investment trusts.