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Risk Reimagined! Series- The Importance of People and Culture to Effective Risk Management
The document discusses the critical role of people and culture in effective risk management, highlighting how organizational culture influences risk perception and decision-making. It addresses various aspects of risk culture, including the importance of leadership, behavior, and ethical considerations in understanding organizational responses to risks. The content is based on insights shared during webinars focused on promoting a healthier risk culture and understanding the complexities associated with risk management.
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Risk Reimagined! Series- The Importance of People and Culture to Effective Risk Management
- 1. Risk Reimagined! The importanceof people and culture to effective risk management
- 2. Risk Reimagined! Risk Management authorand evangelist Former Chairman of the Institute of Risk Management and risk manager Webinar #1: December 1st, 2015 Webinar #2: December 8th, 2015 www.riskreimagined.com Richard AndersonNorman Marks
- 3. Risk Reimagined! About thiswebinar: • CPE: 1 Credit • Program Level: Intermediate to Advanced • Prerequisites and Advance Preparation: N/A • Delivery Method: Group Internet Based • Category: Specialized Knowledge and Applications To receive a CPE credit: • Remain joined to webinar for entire duration of programming (full hour) • Answer all 3 polling questions • Answer all evaluation questions Join the conversation on Twitter with #RiskReimagined
- 4. Risk Reimagined! Regulators aregetting excited by culture Regulator Year No of Pages Culture Risk Culture NAO 2011 18 4 Nil Department of Justice 2011 43 6 Nil FRC 2014 28 20 Nil FSB 2014 14 100+ 73
- 5. Risk Reimagined! It’s allabout people Any organization is an assembly of people: people who take risks as they manage and direct the enterprise; decide how much risk is acceptable or even desirable; and provide oversight into the management of risk across the extended enterprise.
- 6. Risk Reimagined! It’s allabout people “Culture is how organizations ‘do things’” — Robbie Katanga “Organizational culture is the sum of values and rituals which serve as ‘glue’ to integrate the members of the organization” — Richard Perrin
- 7. Risk Reimagined! “Culture eatsstrategy for breakfast” – Peter Drucker
- 8. Risk Reimagined! Polling Question1 Has the risk culture in your organization been reviewed internally or by consultants? Yes, it is reviewed on a regular basis Yes, once We are thinking about it It would never fly It is not possible
- 9. Risk Reimagined! Is therea single culture?
- 10. Risk Reimagined! Is theresuch a thing as a single risk level?
- 11. Risk Reimagined! Compliance areaLevel of risk Bribery and corruption 50 Environmental regulations 20 Financial reporting 30 Export/import regulations 20 Product safety 30 TOTAL 150??? Is there such a thing as a single risk level?
- 12. Risk Reimagined! Why doso many of us take different views of exactly the same risks? How does an organization decide which view is “right”?
- 13. Risk Reimagined! Why dopeople matter? Human nature is … Individualist … or … collectivist What do you believe … ? I or C? Which do you think?
- 14. Risk Reimagined! Why dopeople matter? Human nature is … Individualist … or … collectivist What do you believe … ? I or C? Which do you think? The way we live … “superiors” tell “inferiors” … or … “equals” negotiate the “rules” Prescribed/In-equal … versus … Prescribing/Equal Tell or Negotiate? T or N? Which way does it work?
- 15. Risk Reimagined! Polling Question2 Are you: Individual/Negotiate Collectivist/Negotiate Individual/Tell Collectivist/Tell None of the above Don’t know Don’t Understand
- 16. Risk Reimagined! And culturaltheory... Fatalist Individualist Egalitarian Hierarchist I C Tell Negotiate
- 17. Risk Reimagined! What isthe difference between the “risk” culture and the “organizational” culture? How can it be analyzed?
- 18. Risk Reimagined! IRM RiskCulture Framework IRM’s risk culture framework looks at component parts making up an organisation’s risk culture • How will I react? • How will I respond in recognition of other competing needs? • What will I do? • What will we do? • Our overall risk culture Risk Culture Organisational Culture Behaviours Personal Ethics Personal Predisposition to Risk
- 19. Risk Reimagined! Risk cultureaspects model Risk Culture Tone at the Top Risk Leadership Dealingwith BadNews Governance Accountability Transparency Decisions RiskInformed Decisions Reward Competency Risk Resources RiskSkills
- 20. Risk Reimagined! Thinking aboutrisk is managed… 1. Risk informed decision 2. Deals with risk systemically 3. Throughout the organization 4. With partners 5. Nimble with new issues 6. Can leverage risks 7. Takes more, better- managed risks 8. Gets hit by few surprises 9. Lives by established principles 10. Expects excellent performance 11. Top-level buy-in to risk management 12. Links risk management to strategic and operational management 13. Aims for simplicity and action, not bureaucracy 14. Constantly conscious of risk management performance
- 21. Risk Reimagined! Holding amirror up...
- 22. Risk Reimagined! Holding amirror up...
- 23. Risk Reimagined! Holding amirror up... Regular findings Non-execs normally refuse to take part. Exec directors are ALWAYS more optimistic about their risk management maturity than the rest of the workforce. Risk managers, heads of internal audit etc. ALWAYS know when they are using smoke and mirrors to report up the line. Few others even care...
- 24. Risk Reimagined! Assessing theRisk Culture Desk Top Research Surveys Interviews
- 25. Risk Reimagined! Assessing theRisk Culture Desk Top Research Surveys Interviews Conversations in Risk
- 26. Risk Reimagined! Conversations inrisk management Me CEO EE Partners Suppliers Clients IP owner Back Office
- 27. Risk Reimagined! 0% 25% 50% 75% Production and Projects Sustainability andHSE Drilling Exploration & New Business Finance Other Production and Projects
- 28. Risk Reimagined! 0% 25% 50% 75% Production and Projects Sustainability andHSE Drilling Exploration & New Business Finance Other Sustainability and HSE
- 29. Risk Reimagined! What aboutwhen the actions of one impact the success of another?
- 30. Risk Reimagined! Objective Risk D Objectives,Risks and Controls Objective Risk A Risk B Risk C Control 1 Control 2 Control 3 Control 4 Risk to more than one objective Control to more than one risk
- 31. Risk Reimagined! Objectives, Risksand Controls Objective Risk D Objective Risk A Risk B Risk C Control 1 Control 2 Control 3 Control 4 Department A Department BWho owns Control 4? Who has a guardianship interest?
- 32. Risk Reimagined! Objective Risk D Objectives,Risks and Controls Objective Risk A Risk B Risk C Control 1 Control 2 Control 3 Control 4 Company One Third party coWho owns Control 4? Who has a guardianship interest?
- 33. Risk Reimagined! Risk vs.Organizational Culture Culture: The culture of the organization is built from the behaviours, beliefs, attitudes, activities and ethical responses of the individuals in the organization and determines how those individuals will respond to issues in the “here-and- now”. It is influenced by the tone from the top, incentives and the social & regulatory environment. Risk Culture: “The risk culture of the organization is about how individuals tackle the complexity of the multiple futures that face them in dealing with issues today. It is about “tomorrow” rather than the “here-and-now”. It is what gives an organization the resilience to tackle difficult decisions today while having an eye on the impact tomorrow.”
- 34. Risk Reimagined! And wherethey clash… Issues which any board should want to know about: • Values: Significant deviations from the board’s values. • Silos: Especially where an organization is facing complexity in its dealings internally or externally. • Layering: Layered management reporting prevents new issues being spotted on a timely basis. • Short-termism: Extrapolation from past behaviours is not necessarily good enough for dealing with new futures. • Control vs. Risk: Control (or risk control) management instead of risk management. • Obstruction: Individually obstructive nodes can be very dangerous. • Black holes: Sometimes it is difficult to discern any volume of conversations about risks.
- 35. Risk Reimagined! Balanced Riskrevisited Performance Culture Corporate Ethics Avoiding Pitfalls More Managed Risk Performance Zone Dead Zones
- 36. Risk Reimagined! Balanced Riskrevisited Performance Culture Corporate Ethics Here-and-Now Tomorrow Performance Zone Dead Zones
- 37. Risk Reimagined! Leadership incomplex systems Relationships & behaviours Draw on widely diverse perspectives Adopt open enquiring mind set Go out of your way to make connections Tasks & ideas Be Clear Be Curious Be Courageous Invest in promoting values Establish compelling vision Embrace uncertainty Distribute leadership & decisions
- 38. Risk Reimagined! Polling Question3 Does your organization have a healthy risk culture? Without question, yes With exceptions, mostly yes Only to a degree Not really Unsure
- 39. Risk Reimagined! The bottomline Risk Management should be the disruptive intelligence that pierces perfect-place arrogance
- 40.
- 41. Risk Reimagined! Risk Reimagined! RiskReimagined!Events: Tampa, FL March 3rd, 2016 London, UK April 7th, 2016 Chicago, IL April 22nd, 2016 Details for booking: www.riskreimagined.com
- 42. Risk Reimagined! www.riskreimagined.com Richard Anderson Director,AndersonRisk rca@andersonrisk.com www.AndersonRisk.com Norman Marks Risk Management Author and Evangelist nmarks2@yahoo.com Contact Us: Resolver Inc. 1-888-891-5500 info@resolver.com www.resolver.com Hussain Hasan Principal and Regional Leader for Risk Advisory Services, RSM US LLP 1-312-634-3700 Hussain.hasan@rsmus.com www.rsmus.com