The importance of culture for risk management

Richard Stevens: When we ask Chief Risk Officers what keeps them up at night, they usually mention the specifics like geopolitical risk, credit risk and cybersecurity risk. But focusing on these more common concerns could be causing organisations to overlook a vital factor in managing their risk, which is culture.

Viresh Tailor: Baringa’s latest blog series on de-risking risk explores why culture can be an organisation's biggest risk management blindspot. That's because our world has changed so much in just a few years. We've lived through a global pandemic, we've had strained supply chains, we've had geopolitical crises, we’ve had stubborn inflation and we've had countless other disruptions.

Richard Stevens: But despite these changes, many risk functions still haven't evolved. They're still relying on the same old strategies and solutions to manage their risk. And that's just not enough to stay ahead of the complex, fast-moving threats that we're facing today.

To survive and thrive in a constantly shifting risk landscape, organisations need a new kind of risk function. It starts with an open, integrated, and agile culture where roles and responsibilities are clearly defined, and this needs to be backed by the right technology.

Viresh Tailor: How can financial institutions shape that kind of culture? For one, they need to ask deeper questions about their risk function and the business as a whole. Does the organisational culture empower teams at all levels to speak up and challenge the status quo? Or are people advised to keep their heads down and stick to what they know?

It's also vital to have clear roles and responsibilities around risk. Do people know how their roles fit into the organisation's wider risk framework and what activities they're accountable for? 

Richard Stevens: Finally, financial institutions need technology that helps them understand and manage risk effectively. How can they modernise and digitise while managing the risks that come with reliance on new technologies?

It takes all of these elements working together to shape a risk function that can respond to today’s threats and tomorrow's opportunities. And organisations must act with intention to turn their culture into an asset rather than a blind spot.

Viresh Tailor: If you're ready to kick-start your own cultural transformation, visit our de-risking risk webpage for more details and how to take the first step towards a brighter risk future today.