Wednesday, November 14, 2012

Steps Towards a "Risk Intelligent Culture"

In this week's reading "Competing through organizational agility", Donald Sull emphasizes the importance of managers to mitigate risks while simultaneously focusing on strategic agility. Because of this, I decided to gain insight on how best to develop a "risk intelligent culture" within an organization. A Wall Street Journal article titled "Creating a Risk Intelligent Culture" outlines methods on how best to create a "risk intelligent culture" based on the expertise of two risk specialists of Deloitte & Touche LLP-Eddie Barrett and Scott Baret.

Baret stresses that unlike a risk culture wherein companies are usually aware of the risks they face, creating a "risk intelligent culture" requires preparation and directed effort. Leaders must  take action to align their business strategy with an intelligent risk culture. Although everyone within a business organization that has a risk culture must be responsible for managing risks on a daily basis, typically the key leaders in endorsing a "risk intelligent culture" include: the CEO, the Chief Human Resources Officer, the Chief Risk Officer and in more and more cases the CIO. 

Barrett describes four areas to focus on in developing a "risk intelligent culture". First off, companies must train employees to build their risk capability. Leaders must examine the manner in which employees are motivated to manage risk within the organization. In particular, close attention must be paid to things like incentives and rewards. Also, time must be devoted to enhancing relationships. Better relationships will likely increase communication among employees and promote collaboration on risk initiatives. Lastly, leaders should be very aware that organizations themselves tend to be the offenders. Leaders should scrutinize already existing compliance and other ethical procedures. 

Promoting a "risk intelligent culture" is a big undertaking. Before embarking on a road towards "risk intelligence", organizations must perform an assessment of their organization's current risk culture. Once strengths and weaknesses are identified, a clear action plan can be created. 

Even if an organization has a risk management system in place, Baret advises to create a risk intelligent culture for those companies have a greater chance of acting in the correct manner when the unexpected arises. 

What do you think of the concept of a "Risk intelligent culture"? Are Baret and Barrett's suggestions useful and applicable to your organization? 


Sources: 

David Ulrich and Norm Smallwood, "Capitalizing on Capabilities," Harvard Business Review, Harvard Business School Publishing Reprint No. R0406J, June 2004, pp. 1-8. 
Baret, Scott, and Eddie Barrett. "Creating a Risk Intelligent Culture." Wall Street Journal. N.p., 12 Nov. 2012. Web. 
<http://deloitte.wsj.com/cio/2012/11/12/creating-a-risk-intelligent-culture/?KEYWORDS=human+resources+and+technology>. 

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