Strong operational and enterprise risk programs begin with the alignment of risk culture and business strategy

Getting to grips with risk culture

Organizations often struggle to understand what constitutes a good risk culture and how they can create one. Is it “tone from the top” that creates the right environment, or a good framework? What kinds of activities should be undertaken – scenario analysis, economic capital modeling, risk control self-assessments, or all three?

Creating actionable intelligence

It’s becoming clear that a good risk appetite framework, grounded in the particular issues an organization and industry are facing, is a good place to start. But making that risk appetite come to life is a much bigger challenge. Organizations need to have the right people, resources and solutions in place to ensure that their risk appetite program doesn't get hung up on the process of delivering risk analysis. Rather, implementation of the risk appetite should be focused on delivering the right actionable intelligence to key stakeholders, such as the business lines, senior management and the Board. It is with this information that a true risk culture can be created.

Organizations seeking to create or improve their risk culture should consider:

  • How do stakeholders understand risks in the context of our organization?
  • Is risk appetite communicated effectively in our organization?
  • Do our business units understand their risk profiles? Do they act on that knowledge?
  • Does our Board feel that it is getting the right risk information?
  • How could improved risk management generate improved margins for our business?
  • What kind of input does the risk management function have into the formulation of business strategy?