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Spring Journal

Volume 31, Issue 1

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Friday, 16 February 2018 15:42

How To Promote A Risk-Aware Climate In A Risk-Averse Environment

Making the Investment to Shift Risk Culture

Risk culture, though difficult to define, is one of the most mentioned topics by Fortune 500 executives and for regulators across several industries. However, despite this visibility in quarterly calls, creating, measuring and influencing risk culture continues to defy easy answers for organizations. Yet – as Matt Shinkman and Chris Matlock detail – it is this very challenge that makes tackling risk culture in 2018 a strategic opportunity that pays dividends beyond compliance.

Over the past decade, organizations have made great strides in improving their risk management processes and systems. While this has generally helped senior leaders understand their biggest risk exposures, progressive organizations are now turning their attention to the need for a cultural shift where employees embed risk management in their day-to-day workflows. Our conversations with heads of enterprise risk management (ERM) at over 300 large, global organizations have surfaced a multitude of questions; yet the question, “How do I define and improve risk culture?” is one of the most common. Moreover, it’s a growing concern and interest among financial regulators globally. However, despite this heightened visibility, defining and influencing risk culture continues to defy easy answers for many organizations.

To start, there is no clear sense for what risk culture actually is or how to influence it. Discussions on risk culture sound similar to the parable about the blind men and the elephant, where each person touches a different part of the animal and makes their own judgments about what it is. As a result, we end up defining risk culture in simple terms: the deeply held assumptions, beliefs and values shared by an organization’s employees with respect to risk management.