Risk Culture – Moving from future proofing to future enabling

Perspectives from a risk practitioner and culture practitioners

 At a time when most Australian financial services organisations are rethinking their cultural frame and internal culture dialogue, risk culture and the general health of risk management is equally in the spotlight. This article shares some perspectives on the evolving nature of organisational and risk culture and how risk professionals need to adapt to evolve culture within their organisations.

The risk management benchmark has changed

 As organisational culture evolves, Boards, Regulators, management and most importantly the community at large, are looking for sustainable growth with a focus on redefining their approach to risk management. Driving for higher standards of conduct and fairness in and of itself will challenge organisations to think differently about risk management.

In the current regulatory environment, it is our opinion that organisations need to guard against battening down the hatches and retreating into a default, rules based “future proofing” mindset. If this occurs, we may lose the opportunity of the moment, to change the culture conversation within financial and other institutions.  As we move through the crisis of conscience of corporate Australia, risk has an opportunity to lead cultural evolution, rather than curtail it.

An alternative to “future proofing” is a “future enabled” mindset, where the disruption occurring in financial services and other institutions, to regulators, manufacturers and distributors, is an opportunity to establish a new landscape. The potential new landscape is one that is innovative and collaborative and sees intrinsic economic, systemic and community value in better risk and compliance management.

The emerging role of the risk practitioner

In recent times, there would be many risk practitioners who would have taken a step back and reflected on their role in enabling a more mature cultural dialogue in their organisations.

The role of the risk professional is to drive better and more sustainable organisational decision making. To do this, the risk professional needs to help shape the culture dialogue internally and engage with confidence, with the intent to support meaningful change within their organisations.

This is not a technical challenge; it’s not one about the quality of risk assessments or demanding a seat at the decision table.  Rather, it’s an adaptive challenge, an opportunity to change the internal dialogue after years of misdirection and ambiguity on the intrinsic value of risk. It is intrinsically valuable to have counter balance within the decision-making process; it is intrinsically valuable to respect a fiercely independent view; it is intrinsically valuable to respect a role that gets on the balcony and observes organisational playbooks.

As the paradigm around the role of risk changes, there will be disruption within the risk profession and the need to adapt to grow. Indeed, the risk professional needs to adapt with urgency and intent or miss a real opportunity to contribute to the cultural framing of their organisations. This will mean changes in recruitment, skills, mindsets and approaches.

Rules based compliance regimes can achieve outcomes but in and of themselves are not sustainable. To drive sustainable risk management, the underlying risk culture drivers of the organisation need to be nurtured.

Core risk capacities in a future enabled organisation

 The risk practitioner can play a critical role in establishing a future enabled mindset across an organisation. The risk practitioner can:

• Think, speak and act with whole systems in mind. One of the most profound opportunities for risk practitioners is to bring a systemic view to bear. This includes synthesising polarities such as short and long term, risk and reward, process and personal responsibility and expanding beyond historical constructs and stereotypes. Whole systems views can shape a risk function that guides and evolves as much as it protects and preserves
• Drive constructive and relevant risk and reward dialogue in the organisation. Framing up the risk and reward equation in a meaningful way that is compelling for your business and senior leaders is essential. Explore both risk and opportunity as a genuine business partnership. Actively listen to and invite different perspectives and observe (get on the balcony).
• Actively invest in the right people, tone and skills to drive organisational culture. A more evolved culture = greater adaptive capacity = a more resilient organisation in face of disruption. This in turn means reduced risk of inadequate response to a changing environment.
• Drive a culture of accountability where people are accountable for outcomes over process, and each individual sees that they have responsibility for risk. Efficiency of process is important, but it is not the end game; driving holistic organisational outcomes is all important. Guard against straying into first line which is guaranteed to dilute ownership of risk across the organisation.
• Embed a culture of continuous learning, questioning and insight, making use of risk retrospectives, pilots and safe-fail tests. This means staying keenly aware of changes to the internal and external environment, and framing everything in terms of iteration and evolution, rather than a fixed best practice.

• Encourage a broad foresight lens. Scenarios, black swan events, and looking from the future backwards all give a broad perspective to potential risk and opportunity. The risk professional can add tremendous value to the organisation by bringing in the broader perspectives beyond the tactical or shorter-term frame.

The Risk Professionals role is unique which, when well executed, is a fundamental and often hidden dimension of organisational success. Risk management is about achieving organisational outcomes but in a way that drives sustainable growth and challenges organisations to think and act differently. Beyond immediate outcomes, a ‘future enabled’ risk function has the potential to contribute to dramatically increasing adaptive capacity and organisational resilience.

This article was co-authored with Gavin Groll. Gavin Groll is a senior risk professional with extensive experience in financial services. Views expressed in the article are personal and based on career experiences and learnings.

For interested Culture and Risk Practitioners please join us on Thursday the 21st of March 1:15pm (AEST) for a Webinar on Evolving Risk Culture.

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