Companies operating in today’s global and diverse environment face a range of cultural risks that can significantly impact their success. One of the primary risks is miscommunication arising from differences in language, values and social norms. These misunderstandings can lead to internal conflicts, reduced employee morale and even the loss of key talent. Additionally, cultural insensitivity or ignorance may result in public relations crises if products, marketing campaigns or corporate policies inadvertently offend certain groups or communities.

Another significant risk stems from the challenges of integrating employees from varied cultural backgrounds into a cohesive organizational culture. When companies expand internationally or merge with firms from different regions, they often struggle to harmonize differing workplace expectations, leadership styles and decision-making processes. Failure to manage these differences can result in siloed teams, decreased collaboration and inefficiencies that undermine organizational performance. Moreover, a lack of inclusivity can hinder innovation, as employees may feel reluctant to contribute ideas or participate fully.

To effectively address these cultural risks, organizations should invest in comprehensive cultural competence training and foster an environment of open communication and respect. Leadership must set the tone by modeling inclusive behaviors and encouraging dialogue about cultural differences. It is also important to implement policies and practices that recognize and accommodate diversity, such as flexible holidays or multilingual resources. By proactively embracing cultural awareness and adaptability, companies can not only mitigate risks but also leverage the strengths of a diverse workforce to drive growth and innovation.

1. Focus on Culture: How Culture Assessments Can Support the Audit Committee’s Agenda

There are several different ways to approach a culture assessment. The internal audit functions of some organizations integrate risk culture into all of their existing audits. Others perform a stand-alone assessment. Regardless of the form it takes, an effective culture assessment can be divided into three primary focus areas — organizational vision and values, risk management and people management. In this article, Protiviti Executive Vice President Susan Haseley offers some suggestions on how organizations might focus on these three areas to include a culture assessment in their plans for the year.

2. Organizational Culture Is a Competitive Advantage

Culture issues dominate the current risk agenda in boardrooms and C-suites. A majority of the top 10 risk issues global business leaders identified for 2023 in the latest Top Risks Survey from Protiviti and NC State University’s ERM Initiative relate to people and culture. Furthermore, in this same study’s 10-year outlook, nearly half of the top risks tie to concerns related to organizational culture and talent. These priorities show that board members and C-suite leaders recognize the value — and risks — that the organizational culture creates. In this issue of The Bulletin, we list five steps leadership teams should take to build a better culture.

3. Strengthening Your Risk Culture

Risk culture is the glue that binds all elements of risk management infrastructure together. It reflects the shared values, goals, practices and reinforcement mechanisms that embed risk into an organization’s decision-making processes and risk management into its operations. However, risk culture is an enigma in many organizations. We agree it is important when someone asserts its significance − even though we may not be sure exactly what it is or what to do about it if it requires improvement. This issue of Board Perspectives: Risk Oversight looks at how the use of self-assessment techniques, internal surveys, focus groups and other methods can help an organization understand its current risk culture state.

4. Bank Culture Reform in Hong Kong

On December 19, 2018, the Hong Kong Monetary Authority (HKMA) issued a circular titled “Supervision for Bank Culture.” The new guidance introduced supervisory measures to Authorized Institutions (AIs), including self-assessments and site visits. While a strong bank culture is not a paint-by-numbers exercise, several vital components must be carefully aligned – namely, ethical behavior, tone at the top, mood in the middle and attitude at the base. This article identifies several practices that reflect a sound bank culture and offers steps AIs should use for establishing and maintaining a strong governance framework.

5. Risk Culture Assessment Questionnaire

Risk oversight and risk management are high priorities on the agenda of most organizations. Questions often arise as to how the chief risk officer (CRO) can ensure that organizational learning is supportive of effective risk management. A positive risk culture should help the institution become more proactive in (a) recognizing unique opportunities or risks and (b) using that knowledge to evaluate risk/reward trade-offs and decision-making options to seize the initiative before others do. Organizations can use the questions included in this tool to shape and support an effective risk culture. 

6. Corporate Culture: Are You Curious Enough?

Corporate culture is important; everybody gets that. What is not as universally understood — at least, in action — is that the top-down emphasis on responsible business behavior in any organization is only as strong as its weakest link. In the end, the actions and deeds of managers up, down and across the enterprise either reinforce or undermine the tone articulated by executive and line management through policies and other communications. In this issue of The Bulletin, we explore the question, “Are organizations curious enough to really understand all aspects of their culture?” We discuss practical ways to facilitate such an understanding so that actionable steps can be taken.

7. Can We Trust Culture and Conduct to Guide Decision-Making in the Financial Services Industry?

Can we trust culture and conduct to guide decision-making in the financial services industry? There are days that we wonder. We are going with the optimists, though, and saying “Yes, for the vast majority of financial institutions” but only if the directors and senior managers of these institutions, their regulators, and we as customers remember the lessons learned from past conduct breakdowns and share the responsibility for continually reinforcing the values and behaviors that are important. This whitepaper offers steps senior management and board members can take to establish and sustain a strong culture and ethical conduct within their institutions.

8. Human Capital Exec: The Future Cannot Be an Accident — Plan Now for the Culture You Want in 2030

The COVID-19 pandemic has been both a challenge and an opportunity: While the challenges posed by the pandemic are well known, the opportunities are often hidden. The last few years have given the world lessons about our personhood, interconnectedness and interdependency. One of the most critical lessons learned is we cannot hope to heal without collaborating with those people around us. And we can’t begin to prosper without a healthy culture. The 2030 workplace will have a technology-driven culture yet will be human-centered. Artificial intelligence will be the norm and basis of high performance. 

9. Risk Culture Guide

For risk management and internal controls to function when a crucial decision-making moment arises, directors and executive management must be committed to making it work. Aligning the governance process, risk management and internal controls toward striking the appropriate balance is crucial in this regard. The objective is to balance the entrepreneurial activities and control activities of the organization so that neither one is too disproportionately strong relative to the other. This guide provides auditors with a comprehensive breakdown of the enterprise risk management (ERM) process and risk culture, including definitions, best practices, considerations, objectives and more.

10. Revamping Risk Culture in the Digital Age

Taking risk means more than introducing new products and entering new markets. It entails becoming more innovative in reimagining processes, disrupting business models, and even reinventing the organization itself. In the digital age, the board has an important role to play in strengthening and nurturing the risk culture that facilitates the initiative, creativity and digital thinking so critical to success. This issue of Board Perspectives focuses on why organizations might have to undertake more risk than they may be accustomed to taking if they are to survive.