Indicators of a Sound Risk Culture

Individuals at all levels of the institution are motivated to take part in risk management activities and measures. Performance and talents are well managed through incentives that encourage desired behaviors and actions. These incentives include both financial and non-financial supports to show appreciation and encourage risk culture. The working environment is engaging and open to constructive associations. Communication between the senior staff and the junior management and amongst the low-level staff is effective. The effective challenge is also evident, in which the decision-making process encourages participation amongst employees. There is an extensive degree of accountability for all members of the staff. This is because employees understand and appreciate the approach to risk and the core values of the organization. Therefore, they are willing to perform their prescribed roles while aware that are accountable for their actions. A most important indicator of a good risk governance is the senior management, which plays the role of toning the culture. Their behavior reflects the values they espouse to the junior staff. The leadership is also responsible for monitoring, assessing, and promoting risk culture to create the desired impact on objectives.

Risk culture is important for any organization aspiring to achieve strategic objectives such as increasing revenues. IRM confirms that without a healthy risk culture, organizations may be entangled in serious financial and reputational damages that can threaten their continued existence. In the business world, some organizations have sunk as a result of having a defective risk management system. The Walker report that investigated the corporate governance of United Kingdom Banks and their role in the financial crisis of 2008 concluded that they avoided making significant behavioral changes in risk management practices (Walker, 2009, p. 21). Conversely, the Baker report (2005, p.12) found that risk culture deficiencies played a major role in the BP Texas City explosion that caused the death of fifteen people. The first example shows how a prevailing culture that does not give guidance of appropriate behavior outside the defined rules can lead to uncontrolled risk behavior. In essence, the presence of risk culture does not necessarily guarantee performance; necessary systems are needed to promote innovation and resilience.

Continuity in Risk Culture Growth

Supervisory approaches of a risk culture aim at promoting reliance of businesses as they face various problems. This requires striking the right balance between the intensity and proactive approaches to reflect the nature of the business and the strategic goals of an organization. Timely access to information and significant individuals within the institution is the first line of focus in fostering continuity and growth a good risk culture. Accessibility means that a firm has the information need for analysis and identification of important issues that need special attention or reforms. The periodic assessment of the culture system informs changes that need to be made to strengthen systems. Discussion with the senior management and the board of directors should be encouraged to solicit support for the institution risk culture. Engaging them also ensure that the firm acts promptly to prevent undesirable outcomes from materializing. Conversely, monitoring activities should place greater emphasis on documenting occurrences, decisions, and circumstances that can be used in the future to improve ineffective aspects of the risk culture. Designs, deficiencies, setups, and implementations are reviewed to identify measures needed to strengthen institution risk culture. The lessons learned from the past success and failures are used to develop real changes for the future improvements. By applying intellectual judgment, and clearly articulating significances, the supervisor tasked with the management of an organization’s risk culture should be able to influence key executive and managerial decision-making, and ultimately contributing to the resilience of the organization.