For the past decade regulated entities have established and operated risk culture or behavioural risk capabilities to provide accountable executives and Directors with information on how organisational culture affects value creation and risk mitigation.
Often, these capabilities fall short on their stated objectives.
The most widely used approaches to understand organisational culture are based on research that preceded significant shifts in the external regulatory context and the growing influence of key external stakeholders.
How a problem is framed, with consideration for context and required outcomes, will determine how it’s understood and the nature of efforts to affect change. Many entities are reviewing culture-related objectives and capabilities to improve the quality and impact of generated insights while seeking better cost performance.
Each of the four links below explore common traps in culture-related evaluation activities. Addressing them can provide better insights on the influence of culture on risk taking and risk management effectiveness:
- Confusing Culture with Climate
- The Sum of Culture Subsets
- ‘One-Size-Fits-All’ Doesn’t Fit Everyone
- CMMM (Culture Maturity Model Misappropriation)
Looking Ahead
Organisations can improve the quality and depth of culture-related insights without increasing resources. Often its as simple as rearranging where activities are performed, reconfiguring the content evaluated, and clarifying how reported information should be used by decision makers.
Culture-related information may already exist in other formats, enabling different insights to be combined (‘joining the dots’) for a more comprehensive view of culture and its influence on organisational outcomes.
For instance, Board effectiveness reviews conducted in alignment with ASX Governance Principles or CPS510 target integral governance characteristics. Boards set cultural expectations and boundaries by approving and overseeing strategy, risk appetite, and aspired culture. Harmonising the design and analysis of Board effectiveness and adjacent activities can better show alignment of current/aspired organisational culture with strategy, risk-taking appetite/capacity, and the external operating context.
The first step is to design a target state for required organisational capabilities to satisfy more meaningful objectives. Progressively working towards its attainment means key stakeholders are with you on the journey.