Risk, Trust and Control

The trust of either the dominent coalition, or the management team, is critical to understanding organizational trust, since it is this level of trust that will govern the strategic actions of the organization (Simon, 1957).

As with individuals, some organizations develope greater propensities to trust as dispositional quality, than do others. For organisations, these propensities develope from geographic, industry, and economic histories.

Judgements of ability and integrity would form relatively quick in the course of the relationship while benevolence judgements will take more time. Time will play an important role in the meaningfulness of the variables in risk taking. The effect of perceived benevolence on trust will ıncrease over time as the relationship between parties develps.

As the perception of these factors increases, it is expected that willingness to take a risk in the relationship to increase. Hence, trust increases prospect of risk taking. Measures of risks moderate the relationship between trust and risk taking in this assumption. Trust is the willingness to take risk, hence, the level of trust is an indication of the amount of risk that one is willing to take.

Agency theory and stewardship theory illustrate two different views in using trust and control systems in managing risk. Agency theory proposes using control system in risk management. Consequently, control systems are an alternate mechanism for dealing with risk in relationships. When the risk in a situation is greater than the trust a control system works to lower the perceived risk to a level that can be managed by trust.

However, where there is a very strong system of controls in an organisation it will inhibit the development of trust. Here trustworthy action will be attributed to the existence of control system rather than to the trustee (Stricland, 1958).

Perception of others and of risk inherent in their benevolence is processed for evaluating trustee's ability and integrity, while thinking about them. But trust also involves emotion which influence how people evaluate their level of trust. Therefore, there are new dimensions in the study of trust that has been opened by inclusion of the role of affect, emotion, trust violations, and repair.