Risk CulturePresented for the Risk Engineering & Assessment SymposiumPresented by: Dean EddyDate:         July 2012
ObjectivesRisk Engineering & Assessment Symposium   2
What is an organisation?             • Firstly they are complex structures of social               interactions, conscious...
What is an organisation?                       Closed             OpenRisk Engineering & Assessment Symposium          4
What is organisational culture?      “Manifestation of human intellectual achievement regarded      collectively and the a...
Organisational Culture    “Organisational culture is the pattern of basic assumptions that a    given group has invented, ...
Organisational cultureTaylor, C. (2012) Walking the talk – Building a Culture for Success. Random House Group Limited, Lon...
Financial risk   Cost of not achieving a cultural fit in an organisation                 • 50 hours of HR department’s tim...
What is risk?           Principles and guidelines standard ISO 31000 suggest you need to              “The effect of uncer...
Risk matrix                                          Consequences          LikelihoodRisk Engineering & Assessment Symposi...
Risk awareness• Why is risk awareness important?             • Failed start ups in Australia – 40% in first year          ...
Risk journeyRisk Engineering & Assessment Symposium   12
Risk culture                                            Enabling                                          Organisation    ...
The architecture                                           STRATEGYVISIBLE                                STRUCTURE       ...
A case study• BHP Billiton             • Incorporated in 1885 – self sufficient and closed until 1915             • Used i...
BHP Billiton – what they got rightLeadership Behaviours                     External Climate & Drivers- Clear tone set fro...
BHP Billiton – what they got right                                                   top down perspective                 ...
Not being aware of risk• Krispy Kreme – a case study             • Took their product to the people – large expansion base...
The cost of not being risk awareRisk Engineering & Assessment Symposium   19
What they got wrongHistory                                    Governance Framework & Tools- “fall in love with shadows” ha...
The journey forward Set the stage  - Create a sense or urgency  - Put together a guiding team Decide what to do           ...
The journey forward                                                           MD     Human            Strategy &          ...
Risk aware                                                   top down perspective                                         ...
Risk culture• Final hint for embedding a risk culture               Just keep going………………                                 ...
Good luck to you all on the journey!
Dean EddyM: 0412 301 336E: dean@enhancesolutions.com.au
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Engineering symposium

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Engineering symposium

  1. 1. Risk CulturePresented for the Risk Engineering & Assessment SymposiumPresented by: Dean EddyDate: July 2012
  2. 2. ObjectivesRisk Engineering & Assessment Symposium 2
  3. 3. What is an organisation? • Firstly they are complex structures of social interactions, consciously designed to achieve collective goals • They draw on their environment and transform inputs into outputs • They use the expertise of their human resources to produce results, which can be measured and comparedRisk Engineering & Assessment Symposium 3
  4. 4. What is an organisation? Closed OpenRisk Engineering & Assessment Symposium 4
  5. 5. What is organisational culture? “Manifestation of human intellectual achievement regarded collectively and the achievements of a particular time or people – it is the way of life of a particular society or group” (Oxford Dictionary 2006: 347) • 1960s American model of management was supreme – organisational culture was not considered paramount in management theory • 1970s a shift by the Japanese towards a solid reputation for service, reliability, values and quality – which matched their societal values that found synergies and success • As a result since the 1980s and 1990s culture has played a large part of any business curriculum and seen as a fundamental element for business successRisk Engineering & Assessment Symposium 5
  6. 6. Organisational Culture “Organisational culture is the pattern of basic assumptions that a given group has invented, discovered or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and therefore, to be taught to new members as the new way to perceive, think and feel in relation to those problems” Schein. E. (1984) Sloan Management Quarterly, Winter 1984. p.7Risk Engineering & Assessment Symposium 6
  7. 7. Organisational cultureTaylor, C. (2012) Walking the talk – Building a Culture for Success. Random House Group Limited, London, SW1V 2SA 7
  8. 8. Financial risk Cost of not achieving a cultural fit in an organisation • 50 hours of HR department’s time to manage the issue $ 5,000 • 15 hours spent by senior executives to manage the issue $10,000 • 250 hours of direct manager’s time to manage the issue $25,000 • Associated costs to cover work not achieved in the period $25,000 • Associated costs with recruiting & training of new staff $85,000 $150,000Sutton, R. (2011) Building a Civilised Workplace and Surviving One That Isn’t. Little Brown Book Group. Embankment, London EC4Y 0DY 8
  9. 9. What is risk? Principles and guidelines standard ISO 31000 suggest you need to “The effect of uncertainty on objectives” place risk in the context of being able “to define the external and internal parameters that organisations must consider when they manage risk”Risk Engineering & Assessment Symposium 9
  10. 10. Risk matrix Consequences LikelihoodRisk Engineering & Assessment Symposium 10
  11. 11. Risk awareness• Why is risk awareness important? • Failed start ups in Australia – 40% in first year • 82% in the first ten-years • Reason for these failures – leadership – lack of cultural cohesion – succession planning and foresight • The inability to implement governance and support structures • A mismatch of vision to strategy Source: Australian Tax Office (2011)Risk Engineering & Assessment Symposium 11
  12. 12. Risk journeyRisk Engineering & Assessment Symposium 12
  13. 13. Risk culture Enabling Organisation Structure Tools & Training Part of Strategic Planning Vision / Value Governance Leadership Information & System Consistent Appetite Ownership & CommunicationRisk Engineering & Assessment Symposium 13
  14. 14. The architecture STRATEGYVISIBLE STRUCTURE SYSTEMSINVISIBLE Risk Engineering & Assessment Symposium 14
  15. 15. A case study• BHP Billiton • Incorporated in 1885 – self sufficient and closed until 1915 • Used its own resources – built their own towns – Newcastle, Port Kembla and Whyalla • Became risk aware in the 1970s and their vision shifted. They looked for efficiency and growth after suffering market share lose due to cheaper imported products • Restructured – and sliced into divisions – each with its own organisational structure to ensure flexibility and the ability to react to the market. Each with their own level of accountability • Record profits in 2011 of US$10.52 BillionRisk Engineering & Assessment Symposium 15
  16. 16. BHP Billiton – what they got rightLeadership Behaviours External Climate & Drivers- Clear tone set from top - Industry direction- Culture embedded through - Competitors front-line leaders - Government funding or pressurePerceived Value Risk Managers/Champions & Leaders - Had mandate and authorityGovernance Framework & Tools - Positive change leaders- Provided clear language - Tenacity- Accessible tools - “risk champions” scattered- Responsive structure throughout the business- Linkages and integration- Enabled decision makingRisk Engineering & Assessment Symposium 16
  17. 17. BHP Billiton – what they got right top down perspective inform direct bottom up perspectiveRisk Engineering & Assessment Symposium 17
  18. 18. Not being aware of risk• Krispy Kreme – a case study • Took their product to the people – large expansion based on the balance sheet and not on sustained demand for their product • No full understanding of the market in which they operated • Did not keep the brand exclusive – did not limit distribution • Failure to understand consumer tastesRisk Engineering & Assessment Symposium 18
  19. 19. The cost of not being risk awareRisk Engineering & Assessment Symposium 19
  20. 20. What they got wrongHistory Governance Framework & Tools- “fall in love with shadows” had a - Too complex backwards looking mentality - Full of jargon- “this is the way we’ve always done it” - Reporting processes drove poor behaviours- Misread popularity as long-term loyalty - Paperwork was too complex - Not practical - did not work in organisationLeadership Behaviours - Set up silos- Not enough resources applied - Limited sharing- No follow-up- Blame culture Risk Managers/Champions & Leaders- Claimed ignorance to issues - Not influencers- No effective communication - Not positioned at right level- Acted alone in silos - disconnected - Seen to own risk, rather than share it Risk Engineering & Assessment Symposium 20 - On their own
  21. 21. The journey forward Set the stage - Create a sense or urgency - Put together a guiding team Decide what to do SafetyC’s Journey C’s 5 Journey – 5 - Develop the change vision and strategy High Management Activity Make it happen Supervisory - Communicate the Activity understanding and buy-in Management Team Activity - Empower others to act Low Leadership - Produce short term wins Cr Co Co Co Cu isi nt m m ltu - Do not let up s pl m ro re ia itm l nc en e t Make it stick - Create a new cultureMindTools (2012) Implementing Change Powerfully & Successfully [online] MindTools http://www.mindtools.com/pages/article/newPPM_82.htm (accessed) 5 July 2012. 21
  22. 22. The journey forward MD Human Strategy & Corporate Customer Strategic Risk Services Sustainability Committee Resources Performance Services Members Divisional Divisional Divisional Divisional Divisional Operational Operational Operational Operational Operational Risk Committee Risk Committee Risk CommitteeRisk Committee Risk Committee Aggregated Operational Risk ReportRisk Engineering & Assessment Symposium 22
  23. 23. Risk aware top down perspective inform direct bottom up perspectiveRisk Engineering & Assessment Symposium 23
  24. 24. Risk culture• Final hint for embedding a risk culture Just keep going……………… Patience Perseverance PassionRisk Engineering & Assessment Symposium 24
  25. 25. Good luck to you all on the journey!
  26. 26. Dean EddyM: 0412 301 336E: dean@enhancesolutions.com.au

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