“… Couple of months back, the Times Newspaper had published a report that indicated that only one out of eight risk managers are being listened to and consulted by their directors and corporate leadership!. This article by BusinessWeek argues that board members are increasingly showing interest in their companies’ risk management practices and programs, and recommends reconsidering the risk culture at first place and build the awareness towards making risk-educated decisions. The article argues about setting the top tone for risk tolerance, setting up and communicating ethics and risk policies and few other aspects to setup and foster organizational risk culture . Nonetheless, and although this step is undoubtedly required, it came aftermath the economical turmoil had beaten every single cosmopolitan of this world. Risk Management should have been and should be the bread and butter for decision making authorities and underpinning pillar for every employee way of thinking!” – Mouaz
Board members have taken a greater interest in their company’s risk management programs, trying to understand the top risks facing the organization and their risk mitigation plans. But one area of the risk management program that has not been a focus until now is a company’s “risk culture,” a critical element of risk management efforts and an area that board members should better understand.
What is Risk Culture, and Why it is Important?
Part of the challenge in addressing the issue is obtaining a clear understanding of what is meant by “risk culture.” It can be defined as the system of values and behaviors present throughout an organization that shape risk decisions. Risk culture influences the decisions of management and employees, even if they are not consciously weighing risks and benefits.
One element of risk culture is the degree to which individuals understand that risk and compliance rules apply to everyone as they pursue their business goals. To start, that requires a common understanding of the organization and its business purpose (i.e., their raison d’être). Today, some seem to have lost sight of those business goals, forgetting that they serve the company and shareholders, and not the other way around.