Creating a Risk Culture
Airplanes crashing, car airbags killing drivers, oil spills, rogue share traders and ponzi schemes—every day, we are witnessing examples of how a disregarded Risk culture can result in serious implications for an organization.
In Game of Thrones, The Night King never created a Risk Culture in his people and held too much power which became the weakness of his entire army. Knowing he held the power to destroy his organisation, he should never have been in a position of vulnerability. Risk is all about strengthening our weakest links.
There are three kinds of people in organisations:
- The person with the knowledge of Risk who considers every decision and communication with Risk in mind
- The person with no knowledge of Risk who does not realise that his or her actions and communication have the potential to put lives and the company at risk
- The person who has a knowledge of Risk but chooses to reject this knowledge and act in a way that places the company and individuals at risk
The development of a risk culture throughout the organisation is perhaps the most fundamental tool for effective risk management.
What is Culture? “An organisation’s culture is reflected by what is valued, the dominant leadership styles, the language and symbols, the procedures and routines, and the definitions of success that make an organisation unique.” Cameron and Quinn
How Do You Create a Positive Culture of Risk in Your Organisation?
1. Leaders’ Actions
Like a family where the children watch their parents and copy them, employees watch the leaders of the organisation. How are the leaders responding to risk situations? What are their facial expressions telling us? What are their words telling us? What priority does a risk situation take in their diary? How serious are their decisions?
The leaders are all building a pattern of how we deal with risk in the organisation. Is risk important to the CEO and the board? How about the senior managers and my manager? If it is, then it’s important for me as well.
2. Storytelling
Stories of risk incidents instil both the negative and positive of being risk-aware.
Every company has stories:
“Remember the time John took his iPhone into the ‘phone-free’ area of the gas facility and caused the facility to be shut down?”
“Remember the time when Martha blew the whistle on the manager who was approving housing loans to his friends and family, and she was promoted into a supervisor role soon after.”
Like elders telling stories around the campfire to the younger tribe members, these are the stories that, repeated over and over, stay core to the organisation’s DNA. They provide guidance for daily decision-making on risk.
3. Training, Policies, and Procedures
Training, policies, and procedures give a framework of risk to everyday working life. Think of the skeleton in a body. The bones in the skeleton create a framework to which your muscles and organs can connect. Similarly, in an organisation, risk training, policies, and procedures make up the framework that holds everything else in place.
Many organisations invest in training programs for functions that are explicitly focused on risk management, such as legal, internal audit, and compliance. However, broadening the reach of risk management training to all employees will help them achieve the same language or point of view in seeing risk as important to the organisation.
4. Incentives
Organisations have introduced incentives to encourage appropriate behaviour and do the right thing from both risk management and ethical perspectives. Continuity and reinforcement are achieved by incentives and penalties to maximize compliance with laws, regulations, corporate policies and values. One client we have been working with linked risk management to every employee’s annual bonus.
Deloitte Global reported the result of its recently conducted survey: 60% respondents claimed that their board are already established and embed the risk culture of the enterprise and promote open discussions regarding enterprise’s risk. The incentive compensation plans due to consider alignments of risk with rewards are being reviewed by 63% of directors.
Finally
On a positive note, 85% of respondents claimed significant progress compared to two years ago: Their boards of directors are currently willing to take extra time for risk oversight.
The Learning Factor is the trusted partner in online learning for risk management. Organisations of all sizes trust us to empower their people to become managers of risk through the design and development of online learning.
Our talented team who are specialists in risk strategy, learning design, and digital development all work together to create impactful and genuinely engaging learning experiences.