Building an effective risk culture and alignment to organisational objectives is a critical step on risk management, which can impact the company as a whole.
Understanding and managing the risks the organisation faces is therefore crucial to delivering effective services.
The Association of Chartered Certified Accountants says that the starting point for better risk management for the organisation as a whole, to understand what risk means.
Finance leaders and staff must share a clear understanding of the organisation’s priorities, according to ACCA.
This will enable key risks to objectives to be identified. A critical step here is for an organisation to define its goals clearly, and to systematically identify the particular risks that could impact on the organisation’s key activities.
Linking risks and objectives together helps to develop a healthy ‘risk culture’ where senior management sets the ‘tone from the top’, but risk is seen as everyone’s responsibility.
The ingredients that can help build an effective risk culture within an organisation include:
- Demonstrating a positive attitude towards the management of risk
- Considering risk in every business decision that is made, before the decision is made
- A good risk ‘nervous system’: strong and open communication channels where bad news travels faster than good news and escalation happens as soon as a problem or issue arises
- Taking responsibility for risks and controls, honesty, and clear ownership of risk
- Encouraging and educating others in the management of risk
