Culture: Risk Management Essay

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Risk Culture & Enterprise Risk Management
IRM Risk Culture Seminar 28th February 2013 Alex Hindson

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?

What will this presentation cover?
• • In January 2011 a team was established to develop some usable industry guidance on Risk Culture This presentation is an introduction to the work with a particular focus on the organisation

Culture - a usable definition for the workplace…
Culture: 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

A boundary to culture that focuses in on the management of risk
• The definition of culture adopted is wide and embraces many aspects that extend beyond the interests of risk management • Risk Culture within the context of this work is bounded by how culture interacts with attitudes and behaviours with respect to risk and its management
An extension of the model found in Hillson, D., & Murray-Webster, R. (2007). Understanding and managing risk attitude: Gower Technical Press.

IRM Risk Culture Framework
IRM’s risk culture framework looks at component parts making up an organisation’s risk culture

Risk Compass Type

Organisational Culture as a field of study
• Organisational Culture is a relatively new concept emerging in the 1970’s • Norms and Climate in the workplace preceded Culture
– Norms: The socially accepted things people regularly say and do – Norms perpetuate and reinforce themselves – Climate was observable and easier to research

• Culture
– Is considered as deeper than both Norms and Climate. Culture includes why we do things and is strongly connected to our identity of who we are
– Has become more relevant as people bring more of ‘themselves’ to work

• Reason: We are no longer just a ‘pair of hands’ when we are at work
Schein, E. H. (1990). Organizational culture. American psychologist, 45(2), 109-119.

Organisational Culture
Goffee & Jones Double S Model for organisational culture

Goffee, R., & Jones, G. (1998). The Character of a Corporation: How Your Company's Culture Can Make Or Break Your Business. London,UK: HarperCollinsBusiness

Double S was tested with Risk Professionals
• Solidarity: The goal orientated dimension
• Needed for action plans to bear fruit and deadlines to be met

• Sociability: The social cohesion dimension
• Needed to get risk frameworks and processes embedded

(1) A communal culture is the best culture for all round risk management performance (2) A lack of either Solidarity or Sociability isn’t a neutral factor. It is a disadvantage

Change and change again?
• Applying the findings of the IRM Risk Culture work does not mean multiple change agendas • With an existing change programme underway, it’s a matter of having a Risk Culture perspective to your existing change programme • The methods and tools from the Risk Culture work provide a basis for
– Analysis. Understanding what you currently have – Gap Analysis. Understanding where you want to be – Shifting the culture – Evaluating progress

…..we identified eight aspects of the risk culture of an organisation that could usefully be addressed

Using Risk Culture tools to implement ERM
Objective: How do I drive change to the existing organisational culture in order to make risk management more relevant and effective? ERM Strategy

Risk culture objectives

AS IS Current State

Diagnosis Review of Risk Culture

Design Risk Culture intervention

TO BE Target State

Implement Risk Culture plan

From Diagnosis to Implementation
Regulated organisation where compliance can stifle creativity

Entrepreneurial organisation where ‘anything goes’