What’s Your Risk Culture?

  • May 27, 2016
  • William Hord

When I have asked various industry leaders what their sales and/or service culture looks like and how effective it is, they almost always perk up and deliver an enthusiastic and detailed account. However, when the same question is asked about their risk culture, I am usually met with pause, shrugged shoulders, and at best a high-level “we do a good job managing risk every day” type of response.

Now, this is not to say that there aren’t plenty of organizations out there that fully understand and can articulate their risk culture. I’ve had the pleasure of discussing risk culture with many leaders and hearing accounts of how it was developed and continues to thrive. However, it’s becoming increasingly apparent that there are just as many who struggle to effectively describe their risk culture or if they even have one.

Is this because businesses don’t feel they need a risk culture? Could it be they don’t want to create one? I think the logical answer is of course they want and need a risk culture. Unfortunately, the day-to-day of ensuring they maintain and nourish their sales and service culture seems to take priority and, therefore, the majority of their focus. In addition, building and maintaining any type of successful culture is hard and a lot of work.

An effective risk culture incorporates employees’ awareness, attitudes, and actions toward risk and how it is managed. Moreover, it’s a mindset within the organization that the employees will make well-informed risk decisions since they realize organizations must take adequate risk to produce value.

Making sales and service decisions in the absence of risk considerations not only places the organization in harm’s way, but ultimately erodes part of the very sales and service value they strive to deliver. Employees taking responsibility for managing risk in a comprehensive risk culture can flourish by enhancing the overall value not only for the organization but also, and more importantly, its customers.

Just as each organization is unique, so is its culture. However, most risk cultures do share the following foundational elements:

  • Well-defined risk management philosophy including risk appetite and tolerance
  • Board-approved risk management policy
  • Top-down risk management responsibilities and awareness
  • Effective and recurring training on risk
  • Well-defined risk identification, evaluation, and controls framework
  • Meaningful risk reporting and monitoring
  • Systematic risk follow-up and reassessment
  • Clear articulation of departmental goals and how they align to organizational objectives
  • Continuous risk communication

These similarities, if levied across most organizations’ sales and service culture, would likely mimic each other as well. The lesson here is that you can take many of the same principles that you used to create and maintain your various cultures and apply them to risk.

So ask yourself:

  • How do you think your organization rates against each of these listed items?
  • How do your board and employees think you’re doing in these areas?

If you don’t know the answers — find out. A common, organization-wide understanding of risk is the first step in creating your risk culture and determining how it needs to be enhanced and encouraged.

You can have the best systems, processes, and models; but at the end of the day, it’s still your employees who are making the day-to-day decisions. Having them all doing this from a risk vantage point that drives value to your other cultures will ensure a higher level of success for them, your leadership team, and your customers.

So when we meet and I ask you, “What’s your risk culture?” I can’t wait to see your excitement as you begin to describe your risk culture success!

About the Author:

As Quantivate’s Vice President of ERM Services, William “Bill” Hord has over 29 years of experience in executive management within the financial services industry focused in risk management, business continuity, financial software, and lending & collections.

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