Risk Culture
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The document discusses the importance of risk culture in organizations and outlines the Institute of Risk Management's framework. It highlights the components of a successful risk culture, such as ethical principles and effective communication, while emphasizing the need for strong leadership and accountability from the board. Additionally, it explores ways to foster and change organizational culture towards better risk management practices.
Risk Culture
- 1. Risk Culture – Under the microscope Carolyn Williams The Institute of Risk Management
- 2. Worldwide membership Member groups in: • Middle East • Bermuda • Turkey • UK Regions Plus our open LinkedIn group
- 3. The Institute of Risk Management (IRM) IRM is the world’s leading enterprise-wide risk education institute. Our mission is: ‘Leading the risk profession through delivery of education and life long learning’ We do this through:
- 4. Risk Culture thought leadership
- 5. What we did…. • 6 month project involving 35 team members plus other commentators from UK and overseas • Consultation period on draft document during July 2012 • Around 80 sets of comments to be considered • Generally favourable although we couldn’t do everything suggested! • Document launch Monday 15 October 2012 • Other presentations taking place worldwide
- 7. What do we mean by Risk Culture? Why is risk culture so important? How does culture affect risk management? What does a good risk culture look like? What can the board do about risk culture? How can you change a culture?
- 8. What do we mean by risk culture?
- 9. People, present and past, make the place
- 10. The culture of a group • Arises from its repeated behaviours • Behaviours are shaped by attitudes • Both behaviour and culture are in turn influenced by the culture
- 11. So by risk culture we mean • The values, beliefs, knowledge and understanding about risk shared by a group of people with a common purpose, in particular the employees of an organisation or of teams or groups within an organisation
- 12. Different types of organisation will have different cultures And there can also be different cultures in different parts of the same organisation
- 13. IRM Risk Culture Framework IRM’s risk culture framework looks at component parts making up an organisation’s risk culture
- 14. Personal predisposition to risk The Risk Compass
- 17. Personal ethics Moral DNA Profiling …only 55% of all respondents could say definitively that they would not engage in insider trading if they could make $10m with no risk of getting arrested.” Labaton Sucharow survey 2012
- 19. Organisational Culture Goffee & Jones Double S Model Diagnosing organisational culture
- 20. Why is risk culture so important?
- 21. More regulations, codes and standards than ever before…..
- 22. ….but these are not sufficient in themselves for the successful management of risk….
- 24. …..the missing factor is how people behave in relation to risk, at all levels of the organisation – the risk culture
- 25. How does culture affect risk management?
- 26. …..we surveyed IRM members to establish which organisational culture types would best support successful implementation of risk management …..organisations required both strong Solidarity and Sociability for achieving good quality risk management results
- 27. …..our survey established that the right kind of risk culture can actively help with risk management and that the wrong type of culture, far from being neutral, actually makes it more difficult to manage risk
- 28. …..going back to our model of organisational culture, we refined it further to focus on types of risk culture
- 29. …..so how can we build solidarity and sociability in respect of risk management?
- 30. …..we identified eight aspects of the risk culture of an organisation that could usefully be addressed
- 34. What does a good risk culture look like?
- 35. 10 indicators of a successful risk culture • Distinct and consistent tone from the top • Commitment to ethical principles • Common acceptance of the importance of continuous management of risk • Transparent and timely risk information flowing up and down • Encouragement of risk event reporting and whistle blowing, actively seeking to learn • No process or activity too large or too complex or too obscure • Appropriate risk taking behaviours rewarded and encouraged and inappropriate behaviours challenged and sanctioned • Risk management skills and knowledge valued, encouraged and developed, • Sufficient diversity of perspectives, values and beliefs to ensure that the status quo is consistently and rigorously challenged • Alignment with employee engagement and people strategy
- 36. What can the board do about risk culture?
- 37. Sample from ’10 questions for the Board’ • Are we providing consistent, coherent, sustained and visible leadership in terms of how we expect our people to behave and respond when dealing with risk? • How do we establish sufficiently clear accountabilities for those managing risks and hold them to their accountabilities? • Can people talk openly without fear of consequences or being ignored? • How do we acknowledge and live our stated corporate values when addressing and resolving risk dilemmas? • How do the organisation’s structure, processes and reward systems support or detract from the development of our desired risk culture? • Do we have sufficient organisational humility to look at ourselves from the perspective of stakeholders and not just assume we’re getting it right? • How do we satisfy ourselves that new joiners will quickly absorb our desired cultural values? • How do we support learning and development associated with raising awareness and competence in managing risk at all levels? • What training have we as a board had in risk?
- 38. How can you change a culture?
- 39. …..if the current culture needs to change, the IRM Risk Culture Aspects Model shows the key areas for consideration
- 40. …..there are no quick fixes for changing culture and no ‘recipe book’ solution
- 41. …..Culture change is likely to be a programme in its own right
- 42. Email: [email protected] Tel: +44(0)20 7709 9808 Fax: +44(0)20 7709 0716 Institute of Risk Management 6 Lloyd’s Avenue London EC3N 3AX United Kingdom www.theirm.org