Every organisation faces risks, from market fluctuations to operational challenges. How these risks are managed and embraced often depends on the organisation’s risk culture.
A strong risk culture doesn’t just guide decision-making, it also influences communication, collaboration, and the overall behaviour of employees. It determines whether teams approach risks with caution, confidence, or complacency.
What is Risk Culture?
Risk culture is the shared values, beliefs, and knowledge about risk within an organisation. It’s the approach an organisation takes to risk-taking, and how it influences how risk is managed and addressed.
Risk culture can apply to all organisations, including private companies, public bodies, governments, and not-for-profits. It can influence an organisation’s approach to decision-making, employee behaviour, and risk management
Why Does Strong Risk Culture Matter?
Effective risk management is ultimately made possible by people, which is why having a strong risk culture is important. In addition to supporting the organisation’s strategy, business model, and operational procedures, a risk-aware culture fosters a common knowledge of risk.
When organisations don’t foster a risk culture, they struggle to manage risk. As a result, they are susceptible to potentially devastating outcomes.
A strong risk culture allows organisations to design appropriate risk management processes, mechanisms, and policies.
How Does Risk Culture Impact Organisational Behaviour?
Risk culture significantly shapes organisational behaviour by influencing how decisions are made, how employees respond to uncertainty, and how the organisation navigates and overcomes challenges. A strong risk culture fosters accountability, transparency, and proactive decision-making, enabling teams to identify and address potential threats effectively.
How Can I Assess My Workplace Risk Culture?
When evaluating your organisation’s risk culture, it’s essential to assess several factors. These factors include:
Risk Messaging and Communication
A strong risk culture promotes uniformity in risk messaging and a shared understanding of risk. Clear communication using a shared risk vocabulary improves the organization’s risk understanding, intelligence, and culture. If this messaging is inconsistent it creates confusion and weakens overall risk management.
Risk Governance Structure
Risk intelligence and management are influenced by the enterprise risk governance framework. Policies, procedures, oversight activities, different kinds of risk assessments, risk indicator reports, and programs for ethics and code of conduct should all be a part of this system.
Alignment of Individual Interests
A risk-intelligent risk organisation is typically indicated when personal interests and values coincide with business values, risk appetite, tolerance, and strategic objectives. Risk is reduced and decision-making is improved when people and the organisation share a sense of purpose, ethics, and methodology.
Regulatory Requirements and Other External Attributes
Regulatory requirements and the expectations of customers, investors, and other stakeholders can affect risk culture. The organisation can enhance its risk resilience and risk culture by coordinating its risk management procedures with these expectations.
How Can I Improve Risk Culture?
A healthy risk culture strengthens risk management and improves risk-related decision-making. However, building it requires time and patience. Fortunately, an organisation can create the desired risk culture by following the strategies listed below:
Implement Risk Awareness Training
Risk management roles, responsibilities, and accountability structures should be set up and shared. Employees should also receive customised training based on their duties and business unit if it’s possible and risk management education should be included in new employee training.
Increase Risk Visibility
When employees have better visibility into risks, they can understand the individual and collective actions necessary to manage them. Take advantage of having well-informed employees as employee involvement can strengthen the risk culture significantly.
Incentive Systems
Rewards, recognition, and incentives are powerful ways to drive and reinforce positive employee behaviours. Embedding risk performance metrics into motivational systems and compensation structures can help drive positive risk-related behaviours and strengthen the risk culture.
Evaluate and Report Progress
The effectiveness and performance of the organisation’s risk culture can be evaluated by looking at risk management ownership by business units, acceptable level of leadership, results of critical risk-related decisions, and the use of risk appetite and tolerances in decision-making.