2018 predictions: Risk culture management will dominate thinking
Written by Mark Butterworth, Managing Director, Condie
There is a well used expression that risk management simply equates to good business management. Certainly the success of an organisation depends on effective management skills in its senior team and the way they address culture, and in particular risk culture, drives good governance and the achievement of objectives.
But how do you know if you have a strong risk culture? Well, there have been several initiatives in recent times to try to put some form a structure in place to measure culture tangibly, for example the QBE Risk Culture Profiling Tool. This uses a series of questions under headings such as leadership, people, communication and performance evaluation which carry a scoring system that grades a firm’s culture. Users can quantify their current risk culture and periodically re-visit the tool to measure improvements. This tool is now also available to all AIRMIC members.
Governance standards continue to develop and in 2016 the FRC placed a clear marker on their expectations for culture management in their statement: “a healthy corporate culture is a valuable asset, a source of competitive advantage and vital to the creation and protection of long-term value”.*
And at a recent breakfast briefing, David Styles, director of corporate governance at the FRC gave an early indication of the key issues in the forthcoming consultation on the next amendment to the UK Corporate Governance Code, emphasising that culture management will be at the forefront.
Risk managers will of course already be acutely aware that positive and overt support from the board and senior management for risk management practices is key to the delivery of an effective and risk-conscious organisation. The greater focus on culture will bring risk culture management squarely into the spotlight. The measurement of a good risk culture will be a demanding but rewarding role for all risk managers in 2018.
*Corporate Culture and the Role of Boards, Financial Reporting Council, July 2016