Ethics & Governance
Measuring risk culture
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Risk culture is a complex, forward looking and qualitative component of an organisation.

Further, it requires unique approaches in relation to risk management and mitigation.

Its DNA begins with understanding a firm's inherent culture, which considers the organisation's history, strategy, values, management and industry sector and how these interact within each subculture.

It then monitors and adjusts the organisation's cultural evolution over time.

However, a failure to effectively implement and manage organisational risk culture can result in drastic internal and external consequences, including fraud, corruption, misappropriation, cybercrime and economic crime.

Therefore, it is no surprise, since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, organisations are beginning to assess how their culture overlays and integrates with their overall risk management framework and system.

This article dissects the four key focus areas that should make up an organisation's DNA to encourage a good risk culture: top-down tone, relationships, capability and sustainability.

Top-down tone:

You have probably heard about the importance of having the right 'tone at the top', which refers to the idea that organisations' leaders set the 'tone' - or standard - of ethical and business behaviour. But what does that actually mean and how can it be applied?

As history has shown, the words and actions of management permeate throughout the organisation from the top-down. This 'trickledown' effect means that it is crucial for management to not only communicate the right 'tone' for acceptable behaviour, but to 'live and breathe' these values in all their actions, particularly those that represent and promote the values of honesty, integrity and transparency.

However, while tone is set from the top, creating clear and fluid communication lines, instils positive ethical values, because everyone feels part of the culture. Overall, when assessing organisational tone, the following aspects must be considered.

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