Risk Culture Essential For Effective Development Of Enterprise Risk Management

The global crisis brought risk management to the forefront through improvement in the corporate governance structure world over. It is now clear that risk cannot be eliminated but can only be managed. This is one of the key reasons that development of risk management is seen across the world as leading to strengthening of the corporate governance structure.

Once a professor asked a question to the class, what is the difference between the Indian Institute of Management (IIM) and any other business school? He went on to elaborate that land can be purchased equivalent to the size of IIM, the building can be built similar to IIM, the syllabus can be set same as IIM, faculty can also be recruited and a tough exam like CAT can be created, but still, many of the business schools do not match IIM, why? Replying to his own question, he said, all the contents listed above can be copied and implemented but it not possible to replicate IIM, the simple reason is you cannot copy “Culture” which differentiates IIMs from any other business school in India. Culture flows within the institution or organization, it passes from one individual to another, one generation to another, such things are not written anywhere but still, it flows within the organization. It is infectious. Great organizations are separated from ordinary ones on grounds of culture.

The same is true with risk culture; it is in the system but cannot be seen by the naked eye. What does this mean? Does every employee of the organization turn his thinking to considering risk as a part of everyday work? Is risk considered in every decision-making process? Does a new employee automatically learn from his/her peers on how to think in the new organization, giving due consideration to risk without any formal training?