Presentation engineering symposium

Risk Culture

Presented for the Risk Engineering & Assessment Symposium

Presented by: Dean Eddy

Date: July 2012

Objectives

Risk Engineering & Assessment Symposium 2

What is an organisation?

• Firstly they are complex structures of social interactions, consciously designed to achieve collective goals

• They draw on their environment and transform inputs into outputs

• They use the expertise of their human resources to produce results, which can be measured and compared


What is an organisation?


Closed Open

What is organisational culture?

“Manifestation of human intellectual achievement regarded collectively and the achievements of a particular time or people – it is the way of life of a particular society or group” (Oxford Dictionary 2006: 347)

• 1960s American model of management was supreme –organisational culture was not considered paramount in management theory

• 1970s a shift by the Japanese towards a solid reputation for service, reliability, values and quality – which matched their societal values that found synergies and success

• As a result since the 1980s and 1990s culture has played a large part of any business curriculum and seen as a fundamental element for business success


Organisational Culture

“Organisational culture is the pattern of basic assumptions that a

given group has invented, discovered or developed in learning to

cope with its problems of external adaptation and internal

integration, and that have worked well enough to be considered

valid, and therefore, to be taught to new members as the new way

to perceive, think and feel in relation to those problems” Schein. E. (1984) Sloan Management Quarterly, Winter 1984. p.7


Organisational culture


Financial risk

Cost of not achieving a cultural fit in an organisation

• 50 hours of HR department’s time to manage the issue $ 5,000

• 15 hours spent by senior executives to manage the issue $10,000

• 250 hours of direct manager’s time to manage the issue $25,000

• Associated costs to cover work not achieved in the period $25,000

• Associated costs with recruiting & training of new staff $85,000

$150,000

8Sutton, R. (2011) Building a Civilised Workplace and Surviving One That Isn’t. Little Brown Book Group.

Embankment, London EC4Y 0DY

What is risk?

“The effect of uncertainty on objectives”


Principles and guidelines standard ISO 31000 suggest you need to place risk in the context of being able “to define the external and internal parameters that organisations must consider when they manage risk”

Risk matrix

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Consequences

Like

liho

od

http://www.dpmc.gov.au/implementation/policy.cfm

Risk awareness

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• Why is risk awareness important?

• Failed start ups in Australia – 40% in first year

• 82% in the first ten-years

• Reason for these failures – leadership – lack of cultural

cohesion – succession planning and foresight

• The inability to implement governance and support structures

• A mismatch of vision to strategySource: Australian Tax Office (2011)

Risk Engineering & Assessment Symposium

Risk journey


Risk culture


Vision / Value

Part of Strategic Planning

Consistent Appetite

Enabling Organisation

Structure

Information &System

Ownership & Communication

Tools &Training

GovernanceLeadership

The architecture


STRATEGY

SYSTEMSSTRUCTURE

INVISIBLE

VISIBLE

A case study


• BHP Billiton

• Incorporated in 1885 – self sufficient and closed until 1915

• Used its own resources – built their own towns – Newcastle, Port Kembla and Whyalla

• Became risk aware in the 1970s and their vision shifted. They looked for efficiency and growth after suffering market share lose due to cheaper imported products

• Restructured – and sliced into divisions – each with its own organisational structure to ensure flexibility and the ability to react to the market. Each with their own level of accountability

• Record profits in 2011 of US$10.52 Billion

Leadership Behaviours

- Clear tone set from top

- Culture embedded through

front-line leaders

Perceived Value

Governance Framework & Tools

- Provided clear language

- Accessible tools

- Responsive structure

- Linkages and integration

- Enabled decision making

BHP Billiton – what they got right


External Climate & Drivers

- Industry direction

- Competitors

- Government funding or pressure

Risk Managers/Champions & Leaders

- Had mandate and authority

- Positive change leaders

- Tenacity

- “risk champions” scattered

throughout the business

BHP Billiton – what they got right


top down perspective

bottom up perspective

inform direct

Not being aware of risk


• Krispy Kreme – a case study

• Took their product to the people – large expansion based on

the balance sheet and not on sustained demand for their

product

• No full understanding of the market in which they operated

• Did not keep the brand exclusive – did not limit distribution

• Failure to understand consumer tastes

The cost of not being risk aware


What they got wrong


History

- “fall in love with shadows” had a backwards looking mentality

- “this is the way we’ve always done it”

- Misread popularity as long-term loyalty

Leadership Behaviours

- Not enough resources applied

- No follow-up

- Blame culture

- Claimed ignorance to issues

- No effective communication

- Acted alone in silos - disconnected

Governance Framework & Tools

- Too complex

- Full of jargon

- Reporting processes drove poor

behaviours

- Paperwork was too complex

- Not practical - did not work in

organisation

- Set up silos

- Limited sharing

Risk Managers/Champions & Leaders

- Not influencers

- Not positioned at right level

- Seen to own risk, rather than

share it

- On their own

Safety Journey – 5 C’s

Crisis

Control

Com

pliance

Com

mitm

ent

Culture

Team ActivityManagement

Leadership

High

Low

Supervisory Activity

Management Activity

The journey forward

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Set the stage

- Create a sense or urgency

- Put together a guiding team

Decide what to do

- Develop the change vision and strategy

Make it happen

- Communicate the understanding and buy-in

- Empower others to act

- Produce short term wins

- Do not let up

Make it stick

- Create a new culture

5 C’s Journey

MindTools (2012) Implementing Change Powerfully & Successfully [online] MindTools

http://www.mindtools.com/pages/article/newPPM_82.htm (accessed) 5 July 2012.

The journey forward

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M D

Customer Services

SustainabilityCorporateServices

Strategy & Performance

Strategic Risk Committee Members

Divisional

Operational

Risk Committee

Aggregated Operational Risk Report

Divisional

Operational

Risk Committee

Divisional

Operational

Risk Committee

Divisional

Operational

Risk Committee

Human Resources

Divisional

Operational

Risk Committee

Risk aware


top down perspective

bottom up perspective

inform direct

Risk culture

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• Final hint for embedding a risk culture

Risk Engineering & Assessment Symposium

Patience Perseverance

Passion

Just keep going………………

Good luck to you all on the journey!

Dean Eddy

M: 0412 301 336

E: [email protected]

Business

Presentation engineering symposium