Risk Culture Lab ’s Post

Risk culture encompasses the collective mindset and the shared set of norms, attitudes and behaviours related to the awareness, management and control of risks at all levels in a bank. It shapes employees’ and managers’ day-to-day decisions and has an impact on their risk-taking behaviour. The management body has an essential role in establishing a sound risk culture. When the management body works as a team and creates an environment where members feel empowered to speak up, this positive “tone from the top” will enhance collaboration and team spirit across the whole organisation. The role of the chair is key here. If it is too dominant, there could be a lack of debate, and views and opinions could go unchallenged. On the other hand, management bodies that have a culture of encouraging constructive criticism tend to develop a broader range of views and opinions, based on different experiences, perceptions and values. This is crucial to avoid groupthink, remain informed about the various complex topics and reach good decisions in a rapidly changing environment. #riskculturelab #riskculture https://lnkd.in/epb6Y3E9

In addition to promote a sound risk culture aside from "tone at the top" and rewards for appropriate behavior and penalize inappropriate behavior. The internal credit risk system is at least partly designed to promote and maintain the overall credit culture. Lastly, bank's risk appetite is another essential component of an effective risk governance framework and reinforce the risk culture.

While the structural implementation and operation of your Governance, Risk and Compliance framework is important, having an appropriate risk culture aids the transition from mere compliance to something that creates value for an organisation. This is evident from the instances of employee-created reputational damage to financial service institutions. In most cases, adequate frameworks are in place but they are not embedded in business operations due to misaligned risk culture. Risk culture, although widely defined in conflicting manners, is generally the values, beliefs, knowledge, attitude and understanding of risk shared across an organisation. It’s manifested in how an organisation reacts to uncertainty and risk, and is organisation-wide (operational, strategic, market/investment, and underwriting). An appropriate risk culture will differ between organisations and industries, but it’s one that’s aligned with business strategy and ensures all members of your entity approach risk in the manner that senior management and the Board expects. #riskculturelab #riskculture https://lnkd.in/dfriTMMH

ECB's New Governance Guidelines: Why Banks Must Act Now to Address Deep-Rooted Risk Culture Issues" The recent 2023 Supervisory Review and Evaluation Process (SREP) results reaffirm the ECB's longstanding concerns regarding governance and risk culture shortcomings in European banks. The newly proposed Guide on governance and risk culture offers deeper insights into these issues, particularly regarding risk culture, remuneration, and the evolving requirements under CRD6. The ECB's conclusion is clear: governance issues stem from deeper behavioural and cultural drivers that need to be addressed. This goes beyond policy and process fixes, signalling that a cultural shift is needed within banks. Sadly, there seems to be an increasing focus on the (useless and outdated) three lines of defence. This is an obstacle to building an effective risk culture in banks. The introduction of a fit and proper framework under CRD6, with a January 2026 compliance deadline, adds urgency. Experience from the UK's SMCR regime suggests that banks should begin preparations early, ensuring clarity in roles and responsibilities across management bodies. Additionally, the ECB's growing emphasis on emerging risks—such as those arising from digitalisation and geopolitical developments—further underscores the need for a forward-looking risk culture. Institutions must be proactive in identifying and managing these risks by aligning internal expertise and accountability. Failure to address these issues in a timely manner could prove costly. With the ECB empowered to use Periodic Penalty Payments for non-compliance, banks that delay governance and culture improvements face increasing financial risks. Now is the time for banks to take these guidelines seriously, assess gaps, and begin addressing the root causes of governance deficiencies. At a loss of where to start? Find help here: https://lnkd.in/enSBa2Xh

🚨 The Fresh Prince of Bel-Air Meets Risk Management! 🚨 Ever thought about how The Fresh Prince of Bel-Air could offer lessons in risk management? Well, let’s break it down. 💼💡 In the Banks household, we see a constant tug-of-war between Will’s creativity and Carlton’s *compliance*. Will’s out-of-the-box thinking brings fresh ideas, while Carlton’s adherence to rules ensures stability. Both are necessary for the household to thrive—just like in the world of risk management within the banking industry. ✅ Creativity (Will): Neurodivergent employees, much like Will, bring innovative solutions that challenge the norm. Their unique problem-solving abilities can turn potential risks into opportunities for growth. ✅ Compliance (Carlton): Carlton, on the other hand, represents the need for compliance and rules. Without structure, innovation can descend into chaos. Maintaining a solid risk management framework ensures that creativity doesn’t lead to operational risk. The key takeaway? Financial institutions, much like Uncle Phil, need to balance creativity and compliance to foster both innovation and stability. By embracing neurodivergent talents and fostering a strong risk-aware culture, banks can unlock new opportunities while staying resilient in the face of uncertainty. 💬 Want more insights on how to apply this in your organization? Let’s continue the conversation in my latest article:  🔗 [The Neurodiversity Nexus: Creativity vs Compliance](https://lnkd.in/dJMjcjR8) #RiskManagement #Innovation #Neurodiversity #FreshPrinceOfBelAir #Compliance #Leadership #BankingIndustry #Creativity #BusinessResilience

#Bank boards can help break down organizational silos to understand risk across the organization. My Crowe colleague Asaad Faquir- CCEP, MBA, MBS Faquir digs into this topic with Bank Director.

How can technology elevate risk to become a critical enabler of reinvention, resilience and growth for your organisation—protecting and creating value? #LetsChangeTheWayWeSeeRisk and explore PwC’s Global Risk Survey 2023 to learn how a leading group of ‘Risk Pioneers’ are doing just that—taking risk intelligently in pursuit of growth and opportunity, powered by technology and led by diverse and innovative thinking. 💡 #HumanLedTechPowered #RiskManagement #PwcRisk

Risk culture is an element of corporate culture. It is the aspects of corporate culture that relate to risk. The culture of an organization is neither unique nor uniform throughout the company. Different subcultures exist at different levels of an organization. These variations are brought about by the variety of operations, roles, and activities performed by each organization and each department. For instance, the point of view on the environment taken by the risk management department can be substantially different from that taken by the marketing department. Risk culture is not static but a process that is continuously repeating and renewing itself. Both risk culture and corporate culture evolve through time to the events that affect an organization’s internal operations and to the external environment within which the organization operates. #riskculturelab #riskculture https://lnkd.in/diBQ6vm2

Effective risk culture is the foundation of successful financial institutions. 💰 MIGSO-PCUBED collaborated with a client to enhance their risk culture, aligning their risk management practices with organizational values. 💡 Learn how our strategic approach delivered lasting, positive change. 🚀https://lnkd.in/gTaefS_r #ProjectManagement #RiskManagement #PMO #MIGSOPCUBED

I am pleased to share that BDO has published the Global Risk Landscape 2024 Report. The report shows that 60% of business leaders believe that new risks are increasing in pace. Adopting an antifragile attitude may be the key to turning risk into opportunity. Find out how with our Global Risk Landscape Report now. #bdo #globalrisklandscape2024 #risk #riskadvisory