A strong risk culture can build business resilience, minimise potential losses and help organisations gain a competitive advantage, according to Nicolas Aubert, head of Great Britain at Willis Towers Watson.
Speaking at this year’s Airmic Conference in Harrogate, Aubert emphasised how business success or failure is fundamentally dependent on the behaviour of an organisation’s people.
He said: “In an increasingly complex corporate world, managing risks related to an organisation’s ‘human capital’ is critical. But the management of an organisation’s risk culture offers more than just a way of avoiding the downside of risk. A good, balanced risk culture can help an organisation identify and take advantage of the right opportunities, benefitting from the upside too.”
Aubert also explained how risk culture is built, shaped and reinforced by individuals, groups and leaders within an organisation. He highlighted that to be effective it has to be driven from the top.
“While the effectiveness of any internal controls ultimately depends on the individuals responsible for operating those systems, it is not sufficient for the board to simply set the desired values.”
“Senior executives also need to ensure these values are communicated properly and that they are incentivising the desired behaviours while sanctioning inappropriate behaviour.”
He advised risk managers to consider how the company’s cultures, code of conduct, human resource policies and performance reward systems support risk management as well as the overall objectives of the business.
“Pay and incentive programmes can clearly have an impact on risk culture. This connection must not be overlooked. Leaders need to assess talent risk across the organisation and ensure that risk culture aligns incentives to desired behaviour,” he said.
