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Culture can be an organization's greatest asset or its most significant liability. "Companies that exhibit a winning culture, that have a strong internal compass and inspire their employees" are 3.7 times more likely to be business performance leaders, according to Bain & Company. Given this, every organization's leaders need to build a culture that boosts employee engagement, improves the workplace environment and drives business results. As Airbnb cofounder and CEO Brian Chesky wrote in a letter to employees, "The culture is what creates the foundation for all future innovation. If you break the culture, you break the machine that creates your products."
To help improve their organizations, risk professionals need to understand what culture is, how it drives risk management, how to identify and manage cultural risk and the importance of aligning culture with organizational strategies and goals.
CULTURE AS AN EMERGENT PROPERTY
If you break sugar down into its base elements-hydrogen, oxygen and carbon- and sample each, you would not be able to tell how sugar tastes because taste is determined by how those atoms and molecules are put together and how they interact. Similarly, organizational culture is an emergent property-the collaborative functioning of a system-of human behaviors and beliefs that depends on how the different pieces and parts interact.
Former IBM CEO Lou Gerstner, who is credited with revitalizing the company in the 1990s, articulated the importance of recognizing culture as an emergent property, saying, "I came to see during my time at IBM, culture is not just one aspect of the game, it is the game." He realized that cutting costs, realigning systems and making the right moves in the marketplace were only parts of the equation for success. Recognizing culture as an emergent property helped turn the company around and ultimately grow its market cap from $29 billion in 1993 to $168 billion in 2002.
CULTURE DRIVES RISK MANAGEMENT
Risk is about weighing the relative benefits of options, which people evaluate through the lens of their personal value systems or, in organizational decision-making, the organization's value system. These values are embedded in...