Culture Drives Risk Outcomes
Updated: Jul 20, 2020
by Linley Watson, CEO Peak Performance International
An organisation can have best practice risk controls in place however, it is their culture that ultimately influences the decisions made and the actions taken by its people. The values and behaviours of leaders and staff underpin an organisation’s culture, and manifest in ‘how we do things around here’. Risk culture is a sub-set of organisational culture that reflects the prevailing attitudes and behaviours of all staff towards taking and managing risks.
“Culture, more than rulebooks, determines how an organisation behaves.” Warren Buffet
Underlying cultural drivers are not easy to see. When it comes to risk, leaders can feel that their culture is on the right path but they need evidence to understand the strengths and challenges in their risk culture. The voice of dissent or concern can be lost without the right culture to support open, honest and accountable feedback.
Staff and leaders’ perceptions of accountability, risk management, risk leadership and risk appetite can be understood through auditing the prevailing values and behaviours across an organisation. That is why it is important to complement risk reviews that examine risk management frameworks, policies and procedures with risk culture reviews, and to ‘peek under the hood’ to see what is happening from a cultural perspective.
Reviewing Risk Culture
The first important step in reviewing and assessing an organisation’s risk culture is an online, high-level risk culture survey. RSM uses the Risk Culture Indicator (RCI) tool, developed by culture experts Peak Performance International, which is delivered electronically to participants.
Based on APRA’s definition, the RCI provides a snapshot of staff and leaders’ perceived ability to identify, understand, openly discuss, escalate and act on their organisation’s current and future challenges and risks. The survey identifies and analyses risk culture strengths and challenges. Findings are integrated into RSM’s comprehensive risk assurance reviews. The RCI can also be commissioned as a stand-alone risk culture report.
The Risk Culture Indicator employs three pillars to understand the cultural health of an organisation from a risk perspective.
How The RCI Works
Respondents, preferably all staff and leaders, take 10-15 minutes to answer carefully crafted questions across the three key pillars - Leadership, Communication and Accountability.
Each question is categorised and scored to provide an objective assessment for each RCI pillar, and an overall indicator of the organisation’s risk culture. The RCI survey can be tailored for each client, it includes open questions and options to include demographic data for deeper insights. After analysing the survey responses, a full report is provided, and the results and insights discussed with leaders for potential further action.
“Partnering with Peak Performance International to conduct the Risk Culture Indicator survey enables us to provide a unique level of assurance over the design and implementation of our client’s Risk Management Framework. Our comprehensive reviews provide clients with an opportunity to further align policies, systems and behaviours with expectations, best practice and effective governance techniques.”
- Jeremy Elman, Principal of the Risk Consulting division at RSM
Managing Risk in a Volatile Environment
Risk culture is in the public spotlight due to the findings from the recent Banking, Superannuation and Financial Services Royal Commission. Although mandated by the Australian Prudential Regulation Authority (APRA) for significant players in the financial services industry, reviewing risk culture is an increasingly important business practice for organisations across all sectors.
“The RCI provided us with an objective numerical measure and a clear indication of the strengths and opportunities to improve how risk is managed across our organisation, with insights about staff’s risk management comprehension, engagement and capability.” - Bala Shastri, Head of Risk for Diversa
The volatility of current trading conditions puts a greater focus on the importance of effective risk management, underpinned by a healthy risk culture. Managing risk isn’t always glamorous, but managing risk well is core to implementing strategy and effecting change. This is especially relevant as staff deal with the upheaval of working remotely, transitioning back to the office, and continuing to deliver outcomes in this uncertain environment.
Leaders set the tone and are ultimately accountable for enabling the risk culture. They need to drive a culture that supports people to operate consistently within the espoused risk appetite and within their risk management framework. The RCI provides leaders at the Board and Executive level with the evidence and insights to understand, design and reinforce the right risk culture for their organisation, and to deliver effective risk management.
Linley Watson is CEO of Peak Performance International, a Melbourne-based people and culture consultancy, and a behavioural subject matter expert for RSM.
For more information on the Risk Culture Indicator survey contact Linley on T: 0403149220 E: email@example.com W:www.peakperformance.com.au