What is risk culture?
Risk culture is a complex topic that organisations and regulators are striving to grasp. The complexity comes from the nature of risk culture, which is a combination of factors at the organisational and individual level. To manage risk culture effectively within an organisation, one must be able to analyse a combination of operational and individual behavioural factors in parallel.
Risk culture is an organisation’s “operating environment” or more simply “how work gets done”. Culture manifests itself in behaviours, beliefs and assumptions about what is important, and in decisions that get made. The culture is underpinned by three key drivers: leadership, people drivers and enabling infrastructure.
An organisation’s leaders have a strong influence on the risk culture of the organisation. How leaders behave, what behaviours they tolerate and which leaders are selected sets the tone for a strong or weak risk culture. It sends powerful messages to the organisation about what is important, what types of behaviours are acceptable and not acceptable.
Aon believes that there is still a way to go in the evolution and maturity of how risk culture is identified and managed within organisations. Benchmarking current risk culture factors and trends will allow us to provide participating organisations with insights and a baseline to help shape their risk culture strategy. The long-term goal is to evolve the thinking of risk culture and provide organisations and regulators with insights on how risky cultures within an organisation can be identified and mitigated.
Why you should care about risk culture
Risk culture has become a leading issue for financial institutions and regulators in Australia and around the world. Serious violations of misconduct have pointed to organisational risk culture as a major determinative factor. As such, regulators such as ASIC and APRA are focusing on organisational risk culture and holding board directors responsible for the culture of their company.
In addition to regulatory needs, risk culture determines the ability for an organisation to operate within its risk appetite while maximising market opportunities. A misaligned risk culture could lead to major issues for the organisation or missed business opportunities.
For more details on risk culture, read our Hot Topic on Understanding risk culture or contact Aon today.