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Hopeful and resolute: Anette Mikes wins tenure - and an honorary doctorate

Published

Associate Professor Anette Mikes has been given tenure at Oxford University’s Saïd Business School. In this celebration interview, she talks about her career.

Anette Mikes seems to anticipate disaster, which is, perhaps, not surprising, given the Hungarian-born Associate Professor of Accounting specialises in risk. First, as a young researcher, she wrote her doctoral thesis on risk management in banking – just before the banking crisis led to a meltdown in the international financial system. And, for the last few years, she has turned her not inconsiderable attention to the climate and ecological crisis which, the Oxford Saïd professor says, represents ‘civilisational risk’. She appears relaxed, and says this in a friendly, matter-of-fact way, but coming from an expert in risk, it is rather worrying. Anette does not pull her punches. 

Her fellowship at Oxford's Hertford College and tenure at Oxford Saïd Business School follows more than five years at the University and a pivot from being a recognised thought leader in risk management, to additionally developing new ideas and initiatives in sustainability management. 

Just announced, Anette has been awarded a highly-prestigious honorary doctorate by Sweden's Uppsala University, in recognition of Anette's ground-breaking work on risk management and sustainability.

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Anette claims her doctoral subject was a fortunate coincidence, studying what turned out to be the right thing at the right time, which led to her appointment as an assistant professor at Harvard Business School. But, she explains: ‘I had been doing risk management research: how organisations manage risk. That was my PhD study at the London School of Economics. I did the first field-based study of the management of risk in banks. That earned me a reputation and allowed me to continue to look at how risk management practices evolved during the Great Financial Crisis, and in its aftermath.’

So why did the banks not see the crisis coming? Why did so many seem completely taken by surprise? Didn’t they have risk managers and notice that they were taking on too much risk? 

She explains simply: ‘Banks had risk management systems, but in most cases they didn’t work very well. In the years preceding the financial crisis, I was documenting how risk management was taking place in the face of very unfavourable incentives, poor risk cultures, and ingrained, structural conflicts of interest. 

‘My PhD and subsequent research was a warning that too much reliance on the self-regulating capacity of banks was misplaced. As a society, we were asking too much of risk management per se. Risk management alone cannot tackle structural conflicts of interest. Regulatory reform was therefore necessary.’  

I was able to see from the inside and break the myth that all was well with the banks in the go-go years, when they were just reporting high profits and low risks. It sounded too good to be true – and it was.

Anette Mikes

Associate Professor of Accounting, Saïd Business School.

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Her ground-breaking work on enterprise risk management, the inside view she had of the crisis, led her to land the job at Harvard. 

‘It was a huge opportunity to work on an important topic,’ she explains. But Anette admits: ‘There were times when I felt the weight of the world on my shoulders.’

She was fascinated by risk management, though, why it had failed so spectacularly, and what were the conditions for its success. 

‘There was good risk management and bad risk management,’ she maintains. ‘After an intense case-writing period, Bob Kaplan [Harvard Business School] and I developed a framework for framing risks as preventable, strategic and external, and described how managers can tailor risk management processes according the types of risks they faced and certain contextual givens.

‘Later, we extended this framework to contribute to crisis management, by distinguishing between routine and novel risks. I realised risk management in banking wasn’t functioning very well because of conceptual confusions (for instance, what was a ‘bad’ preventable risks was often treated as a ‘good’ strategic risk)  and systemic issues.

‘I had to go outside banking to see what it’s like when risk management does work well in sectors where there are no (or less pronounced) conflicts of interest.’ 

Studying risk management in high-reliability industries has been key to Anette developing theories of risk management which can be applied to every risk situation – even climate…of which more later.

‘I looked at high reliability organisations. That’s how I got into the electricity industry and aerospace and also NASA. They are the ones that have not just profit as their main purpose but also, and foremost, safety and reliability. They have to give us reliable service. You can’t have black-outs in the electricity grid and, if anything goes wrong in the air or space, people die. Yet tragic accidents happen in supposedly high-reliability organisations, too. These are more than just operators’ errors – it turns out, man-made disasters have deep systemic, organisational roots. This led me to look at how we can do better, to prevent man-made disasters.’

Anette’s research helped her to identify common risk management failures across industries. She was particularly interested in what sociologists call ‘risk incubation’, and she studied its roots in the context of risk management: conflicting risk perceptions, value drift, and the lack of capacity to act on bottom-up risk information. She documented these factors in a number of case studies ranging from the fall of Lehman Brothers to the Kursk submarine rescue failure. But she insists: ‘It turns out, you can design processes that push back on risk incubation, and you can also design tools that can facilitate the discussion of multiple values at risk, helping decision makers to align their risk perceptions and act.’ 

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Oxford Saïd team at the Ministry for the Future

Given her research, it was a natural move for Anette to pivot to looking more closely at climate change – which has led her to taking a leading role in the University’s Oxford Ministry for the Future (OMF). She explains: ‘Climate risk is our biggest risk – this carries the risk of societal collapse, a civilisational risk.’

So, she says, this is a risk that individuals or even individual companies cannot manage alone: ‘It can’t be ignored by individual companies. But we have to look at it more as a system problem. That is why I am interested in developments above the level of individual companies – in professional associations, industry groups, citizens’ assemblies and community organisations.’ 

‘Climate change is our biggest risk. We have to trust what our best scientists say about it, and face up to the challenges it poses. I am interested in the relationships between climate action, risk perceptions and hope. Hope is supposed to be a good thing, a virtue, even. But it can be deceptive too. If you believe that policymakers and governments (or some business superheroes) will solve this problem eventually, that is a passive hope, lulling people into inaction.

‘We need a different kind of hope that comes with resolve to change fundamental beliefs and behaviours. I am thinking of a cultural paradigm shift, in significance similar to the scientific shift that took place five centuries ago, from geo-centrism to helio-centrism,’  Anette explains. To this end, she firmly believes Oxford Saïd (and the University at large) can play an important role ‘as educators’.

From a business school perspective, we can highlight the managerial practices that foster green innovation, and discuss what makes companies prosocial or purposeful and commercially viable at the same time.

Anette Mikes

Associate Professor of Accounting, Saïd Business School.

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Anette adds: 'We can  teach students to recognise green washing and call out companies that do not walk their sustainability talk.'

She sees the worrying bad risk management she identified in the banking crisis and other man-made crises: ‘When there isn’t action, there are vested interests, conflicting risk perceptions, pluralistic values and human biases. People are really good at living with cognitive dissonances. For example, many company leaders know they shouldn’t try to maximise short-term profit at the expense of future people and the planet, but their bonuses are tied to short-term performance evaluation criteria, so they do.’

But, she says, Oxford Saïd has a part to play: ‘Part of it, is to educate leaders who are ecologically aware, inside their organisations are able to infuse other important values to complement the commercial perspective, and outside their companies, are capable of advocating for requisite policy frameworks to catalyse change. Sustainability is a hygiene factor. Not being sustainable is a risk in itself.’

Anette’s concern about the future – the biodiversity and climate crisis that is already upon us - has led her to take a leading role in the Oxford Ministry for the Future (OMF) – named after American author Kim Stanley Robinson’s climate fiction novel. It brings together people from across the University and across disciplines at high-profile events: ‘The Oxford Ministry for the Future is a network of academics, policy makers and sustainability leaders with a mission to share relevant interdisciplinary research, amplifying voices from the humanities and social sciences.'

As convenor of the Hertford-based initiative, Anette says: ‘We convene events around brilliant writers, story-tellers, artists and public thinkers. The next event will be with Pulitzer winner Richard Powers, author of The Overstory, Bewilderment, and Playground. With this trilogy, he created a backdrop against which we can reflect on our responsibilities and role in nature. The novels touch upon economics, business, particularly tech and AI, science, history, aesthetics and morality. Richard Powers draws on a fascinating range of knowledges, both scientific and indigenous, and invites his readers to engage with these ideas.' 

 

Having seen novelists such as Laline Paull and Kim Stanley Robinson at previous OMF events, you realise the power of storytelling. These writers make you sit up, make you feel grief, loss, compassion and hope, they make you reflect...

Anette Mikes

Associate Professor of Accounting, Saïd Business School.

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Kim Stanley Robinson, Laline Paull, AM, Kate Raworth

Anette continues: 'As an economist and management scholar, I feel inspired by them to humanise my own research and teaching; to infuse my scholarship with the values and issues I care about as a human living at this particular juncture in history, at a time described by my Oxford colleague Cameron Hepburn as a 'knife-edge moment'. What we do now really matters.'

Has the climate focus changed her life?

‘My life is more hopeful and more resolute…Oxford is such an amazing place – what we do here can be really important and consequential. In the Ministry for the Future phrase, I like the word “ministry”. We can reclaim its original meaning as a service, a service for others, for society, I owe it to my family who supported me to get here, sometimes at great personal sacrifice, And I owe it to my daughter, and future generations.'

Sustainability concerns have had a major impact on her research and life, but Anette remains fascinated by risk and accounting – and how accounting can drive change inside companies via strategic and moral choices. 'My latest papers are about accountants, sustainability officers, risk managers, and other corporate leaders grappling with climate, environmental, social and commercial tensions inside organisations. Under certain conditions, accounting can be designed to be a resource, or ammunition to them.'

Clearly determined not to fall into one of the traps she perceived in her risk management analysis, Antette is set on impact: ‘Accounting is a very powerful practice: you can bring morality back into business.’

The next Ministry for the Future event: Richard Powers in Conversation takes place on 6 November 2024 in Oxford's Sheldonian Theatre. Book your free tickets