R2A was recently commissioned to complete a desktop risk documentation review in the context of the CBA Prudential Inquiry of 2018. The review has provided a framework for boards across all sectors to consider the strength of their risk culture. This has been bolstered by the revelations from The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Specifically, R2A was asked to provide commentary on the following:
Organisations with a mature risk culture have a good understanding of risk processes and interactions. In psychologist James Reason’s terms, these organisations tend towards a generative risk culture shown in James Reason’ s table of safety risk culture below.
|Pathological culture||Bureaucratic culture||Generative culture|
Key attributes include:
Risk frameworks and characterisation systems such as the popular 5x5 risk matrix (heat map) approach are good reporting tools to present information and should be used to support the risk management feedback process. Organisations should specifically avoid using ‘heatmaps’ as decision making tool as that is inconsistent with fiduciary, safety and environmental legislative requirements.
Risk Appetite Statements for commercial organisations have become very fashionable. The statement addresses the key risk areas for the business and usually considers both the possibility of risk and reward. However, for some elements such as compliance (zero tolerance) and safety (zero harm), risk appetite may be less appropriate as the consequences of failure are so high that there is simply no appetite for it. For this reason, R2A prefers the term risk position statements rather than risk appetite statements.
To get a feel for the risk culture within an organisation, R2A suggest conducting generative interviews with recognised organisational ‘good’ players rather than conducting an audit.
We consider generative interviews to be a top-down enquiry and judgement of unique organisations rather than a bottom-up audit for deficiencies and castigation of variations for like organisations. R2A believes that the objective is to delve sufficiently until evidence to sustain a judgement is transparently available to those who are concerned. (Enquiries should be positive and indicate future directions whereas audits are usually negative and suggest what ought not to be done).
Individuals have different levels of responsibility in any organisation. For example, some are firmly grounded with direct responsibility for service to members. Others work at the community interface surface with responsibilities that extend deep into the organisation as well as high into the community. We understand that the idea is that a team interviews recognised 'good players' at each level of the organisation. If a commonality of problems and, more particularly, solutions are identified consistently from individuals at all levels, then adopting such solutions would be fast, reliable and very, very desirable.
Other positive feedback loops may be created too. The process should be stimulating, educational and constructive. Good ideas from other parts of the organisation ought to be explained and views as to the desirability of implementation in other places sought.
 Reason, J., 1997. Managing the Risks of Organisational Accidents. Aldershot, Hants, England: Ashgate Publishing Limited. Page 38.