1. Risk Culture
Presented for the Risk Engineering & Assessment Symposium
Presented by: Dean Eddy
Date: July 2012

2. Objectives
Risk Engineering & Assessment Symposium 2

3. 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
Risk Engineering & Assessment Symposium 3

4. What is an organisation?
Closed Open
Risk Engineering & Assessment Symposium 4

5. 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
Risk Engineering & Assessment Symposium 5

6. 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
Risk Engineering & Assessment Symposium 6

7. Organisational culture
Taylor, C. (2012) Walking the talk – Building a Culture for Success. Random House Group Limited, London, SW1V 2SA
7

8. 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
Sutton, R. (2011) Building a Civilised Workplace and Surviving One That Isn’t. Little Brown Book Group.
Embankment, London EC4Y 0DY
8

9. What is risk?
Principles and guidelines standard ISO 31000 suggest you need to
“The effect of uncertainty on objectives”
place risk in the context of being able “to define the external and
internal parameters that organisations must consider when they
manage risk”
Risk Engineering & Assessment Symposium 9

10. Risk matrix
Consequences
Likelihood
Risk Engineering & Assessment Symposium 10

11. Risk awareness
• 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 strategy
Source: Australian Tax Office (2011)
Risk Engineering & Assessment Symposium 11

12. Risk journey
Risk Engineering & Assessment Symposium 12

13. Risk culture
Enabling
Organisation
Structure Tools &
Training
Part of
Strategic
Planning
Vision / Value
Governance
Leadership
Information &
System
Consistent
Appetite
Ownership &
Communication
Risk Engineering & Assessment Symposium 13

14. The architecture
STRATEGY
VISIBLE
STRUCTURE SYSTEMS
INVISIBLE
Risk Engineering & Assessment Symposium 14

15. 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
Risk Engineering & Assessment Symposium 15

16. BHP Billiton – what they got right
Leadership Behaviours External Climate & Drivers
- Clear tone set from top - Industry direction
- Culture embedded through - Competitors
front-line leaders - Government funding or pressure
Perceived Value Risk Managers/Champions & Leaders
- Had mandate and authority
Governance Framework & Tools
- Positive change leaders
- Provided clear language
- Tenacity
- Accessible tools
- “risk champions” scattered
- Responsive structure throughout the business
- Linkages and integration
- Enabled decision making
Risk Engineering & Assessment Symposium
16

17. BHP Billiton – what they got right
top down perspective
inform direct
bottom up perspective
Risk Engineering & Assessment Symposium
17

18. 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
Risk Engineering & Assessment Symposium 18

19. The cost of not being risk aware
Risk Engineering & Assessment Symposium 19

20. What they got wrong
History Governance Framework & Tools
- “fall in love with shadows” had a - Too complex
backwards looking mentality
- Full of jargon
- “this is the way we’ve always done
it” - Reporting processes drove poor
behaviours
- Misread popularity as long-term
loyalty - Paperwork was too complex
- Not practical - did not work in
organisation
Leadership Behaviours - Set up silos
- Not enough resources applied
- Limited sharing
- No follow-up
- Blame culture Risk Managers/Champions & Leaders
- Claimed ignorance to issues
- Not influencers
- No effective communication
- Not positioned at right level
- Acted alone in silos - disconnected
- Seen to own risk, rather than
share it
Risk Engineering & Assessment Symposium
20
- On their own

21. The journey forward
Set the stage
- Create a sense or urgency
- Put together a guiding team
Decide what to do SafetyC’s Journey C’s
5 Journey – 5
- Develop the change vision and
strategy
High
Management
Activity
Make it happen
Supervisory
- Communicate the Activity
understanding and buy-in Management
Team Activity
- Empower others to act Low
Leadership
- Produce short term wins
Cr
Co
Co
Co
Cu
isi
nt
m
m
ltu
- Do not let up
s
pl
m
ro
re
ia
itm
l
nc
en
e
t
Make it stick
- Create a new culture
MindTools (2012) Implementing Change Powerfully & Successfully [online] MindTools
http://www.mindtools.com/pages/article/newPPM_82.htm (accessed) 5 July 2012.
21

22. The journey forward
MD
Human Strategy & Corporate Customer Strategic Risk
Services Sustainability Committee
Resources Performance Services
Members
Divisional Divisional Divisional
Divisional Divisional
Operational Operational Operational
Operational Operational
Risk Committee Risk Committee Risk Committee
Risk Committee Risk Committee
Aggregated Operational Risk Report
Risk Engineering & Assessment Symposium 22

23. Risk aware
top down perspective
inform direct
bottom up perspective
Risk Engineering & Assessment Symposium
23

24. Risk culture
• Final hint for embedding a risk culture
Just keep going………………
Patience Perseverance
Passion
Risk Engineering & Assessment Symposium 24

25. Good luck to you all on the journey!

26. Dean Eddy
M: 0412 301 336
E: dean@enhancesolutions.com.au