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Is your firm next? Cultural indifference to managing risk continues to plague companies

Updated: Jul 7, 2021

What is your company's Risk Culture Score?

Corporate risk taking is a good thing. It’s what we do to earn an appropriate return on investment. But many companies do it poorly with tragic consequences. A top five global bank was recently cited by the OCC for having poor risk management infrastructure and controls, resulting in a $400 million fine. The headlines are full of other companies with catastrophic control breakdowns including the world’s leading aircraft manufacturer. If they have problems, you probably do too. In response to the 2008 financial crisis many companies dutifully built Enterprise Risk Management organizations with sufficient staffing and legitimate policies, procedures and implementation tools. But are they working? does management care? SWS Risk Advisory’s easy to apply methodology accurately evaluates your firm’s risk management culture. Without a strong culture that begins with the right tone at the top, the best risk infrastructure in the world has little chance of being effective.

Our approach adapts the risk exposure calculator in Robert Simons’ Harvard Business Review article “How Risky is Your Company.” We built out the culture component enabling a complete assessment of a company’s commitment to risk management. Our experience tells us that companies with a measurably strong risk culture can deploy a control infrastructure not only less elaborate, but more targeted and efficient. In essence, if executives are risk managers then the company manages risk well. But how do you know if the C-level crowd is committed? Our self-assessment tool provides a more objective process for determining an organization’s cultural investment in risk management. It also points to possible cultural and control weaknesses. Changing controls does require understanding the tradeoffs involved. For example, centralized decision making frequently lowers risk exposure, but often at the expense of less market agility and innovation. And yes, you may find your firm is too conservative and risk adverse, leading to underperformance. Click below to download your free one-page risk culture self-assessment tool.

SWS Risk Advisor 15Q Risk Culture Self assessment
Download XLSX • 45KB

And click here if you need help with scoring and interpreting the results, or would like to have further discussions on building a better risk environment.

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