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Transcript of Presentation engineering symposium
Risk Culture
Presented for the Risk Engineering & Assessment Symposium
Presented by: Dean Eddy
Date: July 2012
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
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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
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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
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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
8Sutton, R. (2011) Building a Civilised Workplace and Surviving One That Isn’t. Little Brown Book Group.
Embankment, London EC4Y 0DY
What is risk?
“The effect of uncertainty on objectives”
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Principles and guidelines standard ISO 31000 suggest you need to place risk in the context of being able “to define the external and internal parameters that organisations must consider when they manage risk”
Risk matrix
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Consequences
Like
liho
od
Risk awareness
11
• 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 strategySource: Australian Tax Office (2011)
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Risk culture
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Vision / Value
Part of Strategic Planning
Consistent Appetite
Enabling Organisation
Structure
Information &System
Ownership & Communication
Tools &Training
GovernanceLeadership
The architecture
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STRATEGY
SYSTEMSSTRUCTURE
INVISIBLE
VISIBLE
A case study
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• 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
Leadership Behaviours
- Clear tone set from top
- Culture embedded through
front-line leaders
Perceived Value
Governance Framework & Tools
- Provided clear language
- Accessible tools
- Responsive structure
- Linkages and integration
- Enabled decision making
BHP Billiton – what they got right
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External Climate & Drivers
- Industry direction
- Competitors
- Government funding or pressure
Risk Managers/Champions & Leaders
- Had mandate and authority
- Positive change leaders
- Tenacity
- “risk champions” scattered
throughout the business
BHP Billiton – what they got right
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top down perspective
bottom up perspective
inform direct
Not being aware of risk
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• 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
What they got wrong
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History
- “fall in love with shadows” had a backwards looking mentality
- “this is the way we’ve always done it”
- Misread popularity as long-term loyalty
Leadership Behaviours
- Not enough resources applied
- No follow-up
- Blame culture
- Claimed ignorance to issues
- No effective communication
- Acted alone in silos - disconnected
Governance Framework & Tools
- Too complex
- Full of jargon
- Reporting processes drove poor
behaviours
- Paperwork was too complex
- Not practical - did not work in
organisation
- Set up silos
- Limited sharing
Risk Managers/Champions & Leaders
- Not influencers
- Not positioned at right level
- Seen to own risk, rather than
share it
- On their own
Safety Journey – 5 C’s
Crisis
Control
Com
pliance
Com
mitm
ent
Culture
Team ActivityManagement
Leadership
High
Low
Supervisory Activity
Management Activity
The journey forward
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Set the stage
- Create a sense or urgency
- Put together a guiding team
Decide what to do
- Develop the change vision and strategy
Make it happen
- Communicate the understanding and buy-in
- Empower others to act
- Produce short term wins
- Do not let up
Make it stick
- Create a new culture
5 C’s Journey
MindTools (2012) Implementing Change Powerfully & Successfully [online] MindTools
http://www.mindtools.com/pages/article/newPPM_82.htm (accessed) 5 July 2012.
The journey forward
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M D
Customer Services
SustainabilityCorporateServices
Strategy & Performance
Strategic Risk Committee Members
Divisional
Operational
Risk Committee
Aggregated Operational Risk Report
Divisional
Operational
Risk Committee
Divisional
Operational
Risk Committee
Divisional
Operational
Risk Committee
Human Resources
Divisional
Operational
Risk Committee
Risk aware
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top down perspective
bottom up perspective
inform direct
Risk culture
24
• Final hint for embedding a risk culture
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Patience Perseverance
Passion
Just keep going………………