'Typical risk management processes can focus too much on what can go wrong'

20 Oct 2016 News

Kate Sayer

Typical risk management processes focus too much on where things can go wrong, missing the bigger issues and potentially steering the organisation into difficulties, according to Kate Sayer, partner at Sayer Vincent.

Speaking at the Charity Finance Summit on how to create a risk-intelligent culture, Sayer said typical risk management processes “tend to drive a very risk averse way of thinking and an overall culture that tries to avoid risk”.  

But she said it can focus on the wrong kind of risks that don’t necessarily help the organisation.

“There’s a tendency for the risk register to be a list of things that you are worried about, rather than a proper risk register,” she said. “Risks should be things that you can’t easily predict or where there is uncertainty. They are not a list of things you haven’t got around to doing yet.”

Far too often, according to Sayer, risk management processes “tend to miss the biggest things that the organisation faces”.

“It’s too inward looking and doesn’t take enough account of the external environment. It also often doesn’t include the missed opportunity type of risks – so it fails to capture those successfully in most risk registers,” she said.

Compliance culture

Sayer said some risk management approaches posed the danger of creating a compliance culture within charities.

“What is dangerous about that is that it does really not help your organisation when you get into a stress situation,” she said.

“In the health sector, it’s been well documented that people do not want to own up to errors. If you have a culture that is totally focussed on compliance, then you are much more likely to have people thinking that their behaviour is right when they are following the rules,” she said. “Such a compliance culture is not a happy place to work in.”

Sayer said organisations with a strong compliance culture risk creating an environment where staff who take the initiative to ask difficult questions and “stick their heads above the parapet” risk “getting grief”.

“After a while they learn and think ‘right, I’ll just keep my head down and get on with the job. I do not want to be belittled, humiliated and told off’.”

Financial struggles within an organisation are not helped by such a risk-averse culture, Sayer said.

“Your income may be under pressure but your costs are going up. There’s the obvious financial stresses. I think financial failure follows because there are other things going wrong in the organisation. Sadly if you have a very risk averse and compliance focused culture, this will not equip you well to deal with difficulties either with funding or the need to change your business model.

“You are going to find that very difficult if you have a very compliance focused culture or a blame culture.”

As an alternative, Sayer called for charities to create a “healthy, balanced culture that supports innovation but also is firmly rooted in the values of that sort of organisation”.

 

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