Lars Östman towards a general theory of financial control

Inter­organisational systems 

 

What may be regarded as an economic system does not necessarily have particular 

controlling subjects, at least not in the same sense as a financial entity. Relationships are 

broader. Perspectives are different. Specific areas of significance are given emphasis, and 

interested parties may attach different weight to them. What is an external effect for a 

financial unit now becomes an endogenous phenomenon. For example, risks that are carried 

over to consumers can be regarded as external or not, dependent on the boundaries of the 

system. A typical feature of many of these greater systems is that boundaries are not obvious 

and uncertainties prevail about the functioning. Local and time-bound optimization for a 

smaller system may be valuable, but it also represents a potential problem.  

Both in practice and in theory, inter-organisational control and networks are important 

phenomena. Interaction between organisations horizontal-wise may be a key issue, 

irrespective of organisational boundaries. From that point of view, the division of financial 

functions among different organisations may prove to be an obstacle. After all, each 

organisation has its own financial perspective. In addition, financial interconnections may 

complicate. Some financial organisations are sensitive to operational and financial 

uncertainties in non-financial organisations. Some are sensitive to operational and financial 

uncertainties in other financial organisations, and to variations and shifts in assets and 

funding markets or allocating system, which may or may not be connected to the 

development of non-financial companies. The functioning of financial markets and 

allocating systems is in turn decisive for uncertainties about everything, including the 

development of values-in-exchange of assets and public transfers of funds. Adaptive 

capability in the whole interconnected system is vital. The financial capacity of each 

organisation, including the ability to handle external disturbances, is a tool against 

vulnerability in such systems. During the second half of the 20

th

 century, control systems 

became less and less oriented towards the self-sustainability of individual organisations. A 

rather great vulnerability in financial institutions, with possible long-term occurrence, was 

also accepted through rules. 

In this perspective, too, introducing market values and approximate equivalents in 

financial accounts represents an essential move for both financial and non-financial 

organisations. Such measures will show a more volatile world than traditional measures. 

This raises questions such as: How volatile are signified events fundamentally? What effects 

will signifiers induce?  Predictions of market values require not only a view on fundamental 

processes, irrespective of market development. People also have to judge how prices will 

interact, irrespective of specific fundamental intentions with an asset or a liability. Thus, 

interdependence between observable values will be supported. Volatility will increase, 

sometimes in terms of signified market-related events and beyond this also in terms of 

signifiers without any corresponding movements in underlying activities. Market values and 

approximate equivalents will function better in a period of rising prices than in a period of 

falling prices, when market processes exist with less frequency and behaviours are especially 

irregular. 

 

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