This document presents a study on the effects of risk culture on organizational performance in Ghanaian financial institutions. The study found a high positive correlation between risk culture and all aspects of organizational performance. Specifically, it identified relationships between different components of risk culture and various performance metrics. For example, tone at the top was strongly correlated with profitability and customer satisfaction, while accountability correlated strongly with efficiency and staff performance. The study also found that leadership action/inaction was the biggest challenge to developing effective risk culture. Finally, it proposed a risk culture framework and recommendations, such as business leaders playing an active role and considering non-financial performance measures.

1. KWAME NKRUMAH UNIVERSITY OF SCIENCE AND
TECHNOLOGY, KUMASI
INSTITUTE OF DISTANCE LEARNING
Mphil in Business Consulting and Enterprise Risk
Management
The Effects of Risk Culture on Organisational Performance -
The Cases of Some Selected Financial Institutions in Ghana
Candidate: Benjamin Kpodo
(PG8714812)
B.A. (Hons.) Geography and Resource Development
Supervisor: Dr. Kofi Agyekum

2. Content
1. Background of study
2. Problem statement
3. Objectives and research questions
4. Theoretical framework
5. Empirical review and summary
6. Conceptual framework
7. Research methodology
8. Findings of the research
9. Recommendations

3. Background
 The aftermath of the Global Financial Crisis (GFC,
2008) is the emphasis on risk management as a holistic
business management practice (Walker, 2009; EC, 2010).
 According to the Institute of Risk Management, IRM
(2012), this holistic approach to risk management in
businesses is referred to as Enterprise Risk
Management (ERM).
 The success of an ERM programme is how well it builds
risk culture - organisational behaviours and processes
(PwC, 2009).
 Ashby et al. (2012) suggested that an organisations
performance is affected by its risk culture. Indeed the
failures were attributed to weak risk cultures.

4. Problem statement
 The absence of healthy risk management culture was seen
as the cause of the organisational failures witnessed
during the GFC 2008, (EC, 2010).
 The GFC brought to the fore shortcomings in underlying
risk cultures in affected organisations.
 Prior to the GFC, Waddock (2005) noted that the collapse
of companies across the world can be attributed to weak
risk cultures.
 Improvement in risk culture therefore is likely to ensure
business resilience and enhance business performance.
 Unfortunately studies on the effects of risk culture on
organisation performance were concentrated in the
developed world. (EC, 2010; Ashby, 2011)

5. Objectives and research questions
Objectives Research questions
1. To identify the key components
or determinants of risk culture
and organisational performance;
What are the key components or
determinants of risk culture and
organisational performance?
2. To explore the underlying
challenges to developing effective
risk cultures in Ghanaian
companies;
What are the underlying
challenges to developing effective
risk cultures in Ghanaian
companies?
3. To establish the relationship
between risk culture and
organisational performance and
What is the relationship between
risk culture and organisational
performance?
4. To develop a generic
framework to improve risk
culture in businesses in Ghana.
What generic framework could
be developed to improve risk
culture in businesses in Ghana?

6. Theoretical framework
Theory Construct Implication
Culture
theory
Organisational practices and behaviours that
are expected, valued and supported through
its operations.
(Röschmann, 2014)
Sheedy & Griffin (2014)
Risk culture can be defined in
the light of the organisation’s
operations.
Organisa-
tional
theory
Culture influences all aspects of
organisational life.
(Schein, 2012)
This influence could help
establish the relationship
between risk culture and
performance of the
organisation.
Agency
theory
Agency relation comes into being because of
the separation of ownership and control.
(Jensen & Meckling, 1976)
This control environment
could be equated to the
organisation’s risk culture.
Systems
theory
The organisation is a living organism with
many interdependent parts which have
specific functions and interconnected
responsibilities.
(O’Hair et al., 2005)
Risk culture and
organisational performance
can be said to be related
parts.

7.  The concept of risk culture has grown steadily since the
GFC of 2008 Ashby et al. (2012).
 Following the crisis, several studies suggested that culture
played a major role. (EC, 2010; Walker, 2009; House of Commons
Treasury Committee, 2009; UK Parliamentary Commission on
Banking Standards, 2013).
 Indeed several researchers have established a relationship
between organisational culture and performance. (Denison
and Fey, 2013; Petty et al., 1995; Kotter and Heskett, 1992; Denison,
1990; and Zakari et al., 2013)
 Drawing on studies on the failures the IRM (2012) and
Farrel and Hoon (2015) concluded that a company’s
performance is affected by its risk culture.
 The research therefore sought to establish this in Ghana.
Empirical review and summary

8. Risk Culture
Tone at the top
Accountability
Effective Challenge
Compensation
Business
Performance
Financial Indicators
Non financial
Indicators
Conceptual framework
(Financial Stability Board, 2013; Salz, 2013; Walker 2009; & Eccles, 1991)

9. Research methodology
Philosophy &
approach
Post-positivist - (Patton, 1988), Exploratory and Analytical research
approaches
Research
design
Correlational field survey research (Tharenou et al., 2007) - measure
the relationship between dependent variable and independent
variables, Qualitative and Quantitative research methods
Study
population
Study population - Ghana Club 100, Targeted population –
Banks, Assessable population – RM executives
Sampling
techniques
Reliable sampling frame – research population is finite, Purposive
Sampling, Actual respondents were key risk management or
related executive
Data collection
instruments Questionnaire, Interviews
Data analysis Five point likert scale, Content Analysis, Descriptive Statistics,
Pearson Bivariate Correlational Technique

10. Findings of the research
Determinants of risk culture
No significant differences in risk culture
determinants
Effective
Challenge

11. Findings of the research
 Both financial and non financial measures were fairly
the same across surveyed banks
 Financial measures included:
- Profitability - Efficiency
- Cost - Market share
- Return to shareholders
 Non-financial measures included:
- Assets quality - Customer perception
- Internal processes - Learning and development
- Ability to innovate and agile with change
- Staff moral and resultant output

12. Findings of the research
Relationship between risk culture and
organisational performance
The study revealed a high positive correlation between
risk culture and all aspects of organisational
performance, ranging from financial performance to
non-financial performance.

13. Findings of the research
Unique relationships identified
 Tone at the top is strongly correlated (0.60) with
firm’s profitability whiles accountability is
strongly correlated with efficiency (0.59) and
return to shareholders (0.53).
 There is a positively strong correlation between
tone at the top and customers/clients
performance (0.54) and firm’s operational
processes performance (0.6).
 Accountability is also strongly positively
correlated with staff performance (0.68) and also
strong positively correlated with the firm’s
operational processes (0.6).

14. Findings of the research
Challenges to developing effective risk culture
Corresponding with the mean scores on the
Determinants of Risk Culture, leadership action and
inaction was mentioned as the most important
challenge to developing an effective risk culture.
Schein (1992)

15. Findings of the research
Risk
culture
framework

16. Recommendations
 Business leadership must play an active role in the
development of an effective risk culture;
 In examining the performance of businesses care must
be taken not to exclude non-financial measures;
 Developing an effective risk culture must always be
done taking into account strategic value proposition of
the business in question;
 Performance strategies should be developed on the
basis of the company’s risk culture;
 Investigate the dynamics of risk culture determinants
and their effect on performance across other fields;
 Investigate the RCF further, considering lessons learned
from other cultural change initiatives.

17. Thank you!