Leadership and risk culture: setting a course for success

2023 already looks be a more uncertain, unpredictable and challenging year. The publication of the World Economic Forum (WEF) Global Risk Report has seen the cost-of-living crisis come from nowhere to the number one short term risk.

Several other published reports concur with this. Climate change, the geopolitical landscape and potential conflicts all feature prominently. 

Undoubtedly leaders are facing some of the toughest of times and looking for ways to navigate any choppy waters they may encounter. The natural gravitation of leaders is always to tackle the more short-term risks and issues that have an immediate impact.

Yet at the same time leadership and organisational culture has a significant influence on how risk is managed within an organisation.

Systemic risk culture failings are often unseen and unspoken, yet the impact of these failings can lead to flawed decision making, issues escalation, or worse still, permeate into a crisis.

Strength comes from within

Given the multiple and diverse number of risks we are currently facing, both short and longer term, now is an opportune time for leaders to take a hard look at the risk culture inside their organisations and talk about it.

Strength comes from within. Employees are key in risk mitigation and opportunity efforts and organisational success. Your people are the first line of defence with issues management.

A good organisational risk culture is a leader’s ally: it facilitates more informed and solid decision making that leads to better outcomes. It should go beyond what is required by regulation or legislation.

A good risk culture can be embedded into every employee as part of the organisational culture, and it can have longer term benefits.Take time to reinforce culture

At its most fundamental level, a good risk culture encourages curiosity, opportunity, swift problem spotting and trust.

An employee at all levels should feel comfortable coming forward with relevant observations, ideas and solutions to anything relevant to the organisational success.

This goes beyond the onboarding process, noticeboard posters, annual townhalls and compulsory training to remind employees of values and purpose. Building trust and a colligate approach in the workplace is essential and takes regular activity to reinforce, and this is where leaders play a crucial role.

Reinforcing a good risk culture within an organisation and aligning it with its purpose, mission and success is of course the responsibility of the leadership at all levels.

Whilst the buck stops at executive level when faced with all the consequences and opportunities of organisational risks, these risks are of course managed at an operational level and filtered down to each employee.

No room for error

This is most evident in a high-dependency risk culture environment where there is no margin for error, such as the Royal Navy (RN) submarine service.

Every submariner is a volunteer for the service and is aware of the extra risks in this environment. After undergoing his or her basic naval training, and then professional training, they complete the lengthy and rigorous submarine training, longer for leaders onboard.

Aside from their role as an underwater warship primed to take defensive action to defend British interests, there are multiple potential hazards and risks onboard. For example, should the submarine suffer a fire or unexpected collision.

In all cases, whatever time of day or night, and wherever any individual crew member may be on the boat, they may be the only person that can see and act on the risk and mitigate it turning into a disaster.

Everyone is trained for all key operations and emergencies and know exactly what to do. The risk culture is always absolute – their lives depend on it.

The example of the RN submarine service provides leaders with some key takeaways to consider how a good risk culture can be built or strengthened to withstand the vigour’s of current leadership and organisational challenges:

• Risk culture is strengthened with a foundational team culture: Embed at an early stage and reinforce regularly.
• Vulnerabilities are known to all: Acknowledge and recognise what to do when a problem arises and rehearse regularly.
• Build trust and encouraging open dialogue: Strengthen the team culture through leadership-led open, regular and transparent two-way communications.
• Build risk culture capability and confidence: Credible and trusted reporting processes that encourage employees to come forward – they can both flag problems and opportunities and be a major contributor to the solution.
• Reward and Acknowledge: Motivate employees to develop a good risk culture through reward schemes and defined career progression.

The challenges of today faced by leadership are also the opportunities. A good start is a review of strategic risks, the culture within the organisation and the interdependency between the two.

There will be flaws and gaps – even in the most well-oiled organisations. Examining and addressing systemic risks in organisations starts with the people managing them at an everyday level.

Embedding how important a good risk culture is will go a long way to steering an organisation successfully beyond the choppy waters of today.

Sheena Thomson is founder and director, Sheena Thomson Consulting and CrisisFit® programme director