Risk Culture gets the Blame
Poor Risk Culture has been often blamed for some of the headline corporate failures of the past several years. Regulators and rating agencies have spoken out about what they would suggest as important elements of a strong risk culture and the following 10 elements all show up on more than one of those lists:
1. Risk Governance – involvement of the board in risk management
2. Risk Appetite – clear statement of the risk that the organization would be willing to accept
3. Compensation – incentive compensation does not conflict with goals of risk management
4. Tone at the Top – board and top management are publically vocal in support of risk management
5. Accountability – Individuals are held accountable for violations of risk limits
6. Challenge – it is acceptable to publically disagree with risk assessments
7. Risk Organization – individuals are assigned specific roles to facilitate the risk management program, including a lead risk officer
8. Broad communication /participation in RM – risk management is everyone’s job and everyone knows what is happening
9. RM Linked to strategy – risk management program is consistent with company strategy and planning considers risk information
10. Separate Measurement and Management of risk – no one assesses their own performance regarding risk and risk management
Those are all good things for a firm to do to make it more likely for their risk management to succeed, but this list hardly makes up a Risk Culture.
And RISKVIEWS has made over 50 posts about various aspects of risk culture.