New handbook a ‘must-have’ guide for directors on managing corporate culture risk
With scandals including CommInsure’s denial of legitimate insurance claims, misconduct in the banks’ financial planning arms and ANZ’s and Westpac’s alleged rigging of the bank bill rate driving home the role corporate culture plays in shaping employee behaviour, the release of Governance Institute’s Risk management for directors:A handbook could not be more timely.
Not only have these cases of corporate misconduct drawn intense public criticism, they have also sparked a fierce debate about whether current criminal laws should be extended to cover directors and management where an organisation breaches obligations as a result of an undesirable culture.
Both ASIC and APRA have specifically signalled that they see corporate culture as a ‘key risk area’, due to the strong connection between poor culture and poor conduct. Both regulators are actively reviewing company practices which they say are directly linked to culture, including promotion processes, reward and incentive structures, recruitment and training policies, whistleblowing policies, complaints processes, staff engagement and the like.
“The potential exposure of boards and senior executives in the culture stakes also means that boards need to be far more diligent in their oversight of this escalating risk,” says Governance Institute chief executive Steven Burrell.
“For directors, it can be very challenging to understand the degree to which the company’s culture — namely, the actual values and behaviours of those in the organisation — truly reflects its desired culture. Boards need to understand if there is a disconnect between the company’s stated and ‘lived’ values and behaviours, because it is only the lived culture as reflected in grassroots behaviours and customer interactions that matters.”
“The board is ultimately responsible for deciding the nature and extent of the risks it is prepared to take to meet strategic objectives. It sets the risk appetite of the organisation, which explicitly articulates the attitudes to and boundaries of risk that the board expects senior management to take. Questioning management about culture, in a manner that elucidates information, is part of any board’s approach to it oversight of risk management and this handbook is an excellent road map for directors heading down this path.”
Governance Institute’s Risk management for directors:A handbook is designed for those seeking clarity on the interaction between governance and risk management to avoid confusion in the responsibilities of those with an oversight role and those with an implementation role. It also covers the linkage between risk management and culture, with questions for consideration by directors when reviewing if senior management has taken the necessary steps to monitor and manage the organisation’s material risks.
“It is a ‘must-have’ guide for every director,” Mr Burrell concluded.
The handbook is free to download. You will need to login to your My Governance Institute account. If you do not have an account, create one here.
For further information contact Viv Hardy on 02 9283 4113 or 0411 208 951, or Su Lin Ho on (02) 9283 4110 or 0421 616 617, or Steven Burrell on (02) 9223 5744 or 0407 708 485.
About Governance Institute of Australia
Governance Institute of Australia is the only independent professional association with a sole focus on whole-of-organisation governance. Our education, support and networking opportunities for directors, company secretaries, governance professionals and risk managers are second to none.