In this episode of our podcast series, Transforming business with MinterEllison: ideas and challenges that are shaping our future, we discuss what leaders can do to impact organisational culture, who is responsible for delivering that cultural change and how culture can be measured.
Revelations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry revealed how poor organisational culture can have devastating impacts, including legal non-compliance, dishonest and misleading conduct, and adverse consequences for customers.
In this podcast, we spoke with cultural risk expert Elizabeth Arzadon, who was recently appointed by ASIC to their governance taskforce. Her mission was to examine and review the impact of board culture on effective oversight of non-financial risk in a range of ASX100 companies.
We also spoke with partner Rahoul Chowdry, who leads MinterEllison's risk, regulatory & governance consulting services.
Their observations and advice on organisational culture extend well beyond the financial services industry, and can apply to any team or organisation.
Under certain conditions, it’s almost inevitable that there will be cultural challenges and pressures on behaviour.
“It would be great if we could get to a place where instead of culture being a reactive topic, we viewed cultural risk as something that all businesses face. Then we can be more proactive about assessing the various factors that might be placing pressure on behaviour.”
There are various ways an organisation may approach measuring culture.
For example, instead of trying to figure out what are the one or two best sources of information, it's helpful to triangulate a number of them. This helps address the inevitable bias that creeps into different perspectives, noting that every individual has bias based on the perspective from which they are coming.
Social media has played an important role in shaping organisations' approaches to cultural issues.
“On one hand, social media amplifies issues because of the speed with which it can reach a wide readership. On the other hand, there could be a risk of paying excessive attention to a smaller group of loud complainants whose grievances are on the margin.”
One positive function of social media is to use it to respond to complaints in a timely manner, resolve them rapidly, and move forward quickly.
Boards are ultimately responsible for providing leadership and strategic guidance to their organisations. They are also typically responsible for monitoring and assessing the effectiveness of risk management in an organisation. Regulators do not aim to ensure that financial institutions never fail. Instead, their remit is to promote effective governance of risk, help ensure that markets are well informed and help minimise the adverse impact or contamination effects of a distressed organisation.
It helps to think about the relationship between institutions and regulators, and the degree to which there is aligned purpose, trust and respect between these two very important components of the system.
Hear the full discussion in our podcast.