Organisational culture and Risk Management

Risk Managers will appreciate that a proactive culture towards risk management cannot be enforced and neither is it sustainable when introduced through short term thinking / urgency (although possible) . Sustainable risk management requires organisations to embark on a journey overcoming challenges of inertia, discipline shortcomings, change fatigue… The intent of this article is to explore the contribution of culture on risk management and vice-versa, towards development of an appreciation towards fostering a risk-centric organisation. My hypothesis is that ‘Risk Management and Organisational culture have a bi-directional associativity with each influencing and being influenced by the other.

I will base my findings on a large organisation that has undergone both incremental and radical transformations. Not only does this give us a rich history of evolution, it also showcases the transition of staff within the organisation through that change, and how the change between organisational culture and people had a bidirectional impact on its own. Organisational Culture in large multinational organisations feature a melting pot of different nationalities, demographics, management styles and pace of change (technology-dependent or otherwise). Attitudes to organisational change are a good measure to study the variations in the difference between culture of organisation and individual – both undergoing change at the same time.  Crucial also is understanding the types of culture and then identifying a core team of individuals that display different attributes – technical skills, go-getter, etc (Belbin techniques can be useful when /if used effectively!!). Effective training enables this core team to be positive change agents within the organization – straddling along when required and going all guns blazing when necessary.In a study, Berg and Kreiner (1990) even go as far as to state that the architecture of buildings have an influence on culture with people’s attitudes to corporate discipline being influenced – Risk Management, being the theme for this article.

Organisational cultures have been classified by several experts (Handy, 1978 et al) into categories:

  • Power culture

Influenced by solar energy, this culture represents a source of power from which rays of influence spread throughout the organisation. Such culture is often considered tough, abrasive and more interested in ends than the means to attain them. The greatest strength is to react quickly, but is heavily dependent on the person at the centre.  On a personal front, I have had to adopt this culture (although not recommended for a longer horizon) when dealing with corporate discipline issues to overcome business reputation risks.

  • Role culture

Primarily a bureaucracy (not limited to the popular negative connotation) and found in most organisations (public sector, oil industry, banking…), risk management in such organisation cultures relies on logic and rationality – albeit theoretically!! Its strengths of rules, processes and job descriptions can also be weaknesses in adapting to rapidly evolving dynamic situations. But since hosts of this culture (established organisations) are less likely to experience radical change, the internal risk management function is more predictable and suited towards incremental change.

However this form of organisational culture can also lead to very slow reaction (and aversion) to changes that may be necessitated. For example, when an organisation faces constraints (changes in political parties leading to reduction in funding, for example) these cultures offer the maximum resistance to change in risk management although resource constraints will require the exact opposite. For example, the organisation may want to be as risk-effective and value-focussed as before (if not more), but will offer less resources (job losses, say). Risk Management functions in such cultures will undergo major upheavals more so because leadership (both risk and other senior functions) tend to seek consensus and a process-driven organisation; where in reality, a power culture may be needed for the rapid transformation phase.

To be continued….

  • Task culture
  • Person culture

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Posted on February 20, 2010, in Risk & Culture and tagged , . Bookmark the permalink. Leave a comment.

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