We start the Risk Culture Week by sharing with you some interesting findings from Chen et al.’s empirical study about the relationship between organizational culture and the maturity of ERM.
Why read it?
It’s a heavier kind of paper that will take some effort to digest. But if you work in an organization where you are regularly asked to justify activities with quantitative analysis, then this empirical study could be what you need.
Following various scandals, the question has arisen as to the usefulness of implementing risk management mechanisms in not-for-profit organizations, just as corporates do. After all, the only difference between these two types of entities is the nature of the objectives pursued. What is common is that both types of entities want to achieve objectives and they see risk management as a means to facilitate it.
Based on a questionnaire sent out to CEOs in the not-for-profit sector in Australia, the authors demonstrate that a positive relationship exists between two constructs of organizational culture, namely innovation (or the adaptability to change and the capacity to experiment) and result orientation (or the activities designed to achieve the social objectives of the entity), and the maturity of ERM.
Taken together, these results suggest that organizational culture contributes towards risk management maturity and that it is, therefore, important to build and maintain such a culture.
While not talking explicitly about risk culture, the authors recognize that organizational culture serves to provide the overarching antecedent conditions which may give rise to a subsequent and particular risk culture.
Chen et al. (2019)