BUSINESS RISK SENTIMENTBuilding a positive risk culture

Richard Thomas IRM Risk Leaders Conference 2015

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New risks

QBE November 2015

In June 2014, we presented the results of our initial research on managing risk in a challenging business environment. These confirmed our belief that businesses had taken on a range of completely new risk exposures over the last few years.

Over a third had gained exposure to new market or product risk and three in ten had taken on new operational risk. Many others had also assumed new financial risk and new strategic risk. Our conclusion is that the majority of businesses have become more tolerant of risk in recent years as they seek to win new business. 

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Approaching risk

QBE November 2015

Specific areas for attention included:

• identifying what risks can be measured and how best to do this;

• improving ownership within the business for capturing data about specific incidents and ensuring the accuracy and consistency of that data;

• how to use the information captured to identify strategies for improving risk management; • allocating responsibility and tracking activity, and

• improving ability to measure and quantify the resulting return on investment. 

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Recovering economy

QBE November 2015

• This was published last February when we looked at the implications for risk management in an economic environment of continuing uncertainty. It confirmed the complexity of the risk management challenge currently facing individual businesses.

• Risk profiles remain in a state of continuous flux against a background of increased levels of risk and new exposures for many businesses.

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Recovering economy

QBE November 2015

There was also increasing unease about the outlook for interest rates, with one in five businesses seeing this as the most worrying aspect on the UK economic horizon. Nearly one in four decision-makers indicated that an increase in interest rates of up to 0.5% would start to have a tangible impact on their own business. A higher increase of up to 1.5% would affect almost half.

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Risk culture

QBE November 2015

› Organisational culture can be one of the cornerstones of success in managing risk or a real barrier to progress.

› I would define a positive risk management culture as a set of shared beliefs and values about the importance of risk management

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Positive risk management culture

QBE November 2015

Our latest research focuses on the extent to which UK businesses have a positive risk management culture embedded throughout their organisations, the critical steps they need to take to embed this culture, and which of these steps have the greatest impact.It seems that relatively few businesses in the UK believe they have a positive risk culture that is genuinely embedded. Only 30% of respondents indicated that their businesses had embedded a positive risk management culture to a ‘significant’ degree.

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Components of risk awareness

QBE November 2015

1 Senior management leadership and direction

2 Identification of an appropriate risk culture

3 Regular awareness and development programmes

4 The ability of employees to speak out and report concerns

5 Rewarding potential improvement

6 Visibility of key performance indicators (KPIs)

7 The inclusion of positive risk behaviour within employees’ annual assessments

8 Discussion of key learning points from incidents

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How are we doing ?

QBE November 2015

Finally, considering the following questions may be valuable

To what extent is the culture of my organisation inhibiting a best practice approach to risk management?

Where are the blocks and why do they exist?

How do I instil a culture to embed rigour and robustness into assessment and management of risk