Why People Risk matters for your organisation
‘Corporations can be liable for failing to actively manage corporate culture/risk.’
The Board challenge is to demonstrate proactive oversight of culture/risk.
People Risk Diagnostic
While ‘corporate culture’ means many things to many people, People Risk specifically refers to the hidden attitudes and behaviours of employees and managers that are found at the heart of all corporate scandals. A high People Risk exposure can result in significant financial and reputational damage to an organisation. Indeed, effectively managing People Risk, not culture, is the key to keeping your Board out of the headlines.
The People Risk Diagnostic from Effective Governance uses advanced analytic techniques to unearth risky behaviour patterns that are hidden from the eyes of management and the Board. We expose this Shadow Culture of informal social rules and system-gaming by digging into the day-to-day attitudes of employees to identify clusters of high risk factors that could exist in any part of the organisation. The People Risk Diagnostic produces risk reports for Boards and management, along with targeted remedial strategies to address areas of concern. The result is a more robust governance system that not only provides oversight for financial, regulatory and strategic risks, but also monitors the less visible risks within our people and social systems.
While many organisations have sophisticated risk management frameworks, policies and procedures, most do not address the risk attitudes and behaviours found in an organisation’s Shadow Culture. Our People Risk Diagnostic is a powerful tool for Boards to manage People Risk governance.
There are six components of People Risk:
- Ethical or Appropriate Behaviour
- Capability or Talent
- Quality of Decision Making
- Recruitment or Staffing Levels
- Role Competence
- Morale or Staff Engagement
The People Risk Diagnostic is not a traditional culture program or engagement survey. It focuses on the measurable inputs and outputs of culture that specifically relate to People Risk and provides an immediate, independent and objective assessment of an organisation’s exposure.
Our Approach to People Risk
The People Risk Diagnostic is a process that equips Boards to understand and mitigate the Shadow Culture that is not otherwise readily visible to a Board. The Shadow Culture has a powerful influence on employee behaviours and whether existing risk management systems will be effective.
The Effective Governance People Risk Diagnostic identifies the behavioural markers of Shadow Culture, where these risks are likely to reside within the organisation’s systems of leadership, procedures, performance and capability. It then allows the Board and management to put in place remedial strategies and ongoing monitoring mechanisms (through a reporting dashboard) to better align and manage the organisation’s individual Shadow Culture and People Risks.
The benefits of the People Risk Diagnostic include:
• Identifying any misalignment of the Board’s expectations of the organisational culture and the staff culture in the workplace;
• Establishing a clear and consistent reporting dashboard on people governance for the Board;
• Promoting transparent reporting relationships between management and the Board;
• Providing tailored information and guidance on mitigation of People Risk; and
• Demonstrates the Board’s proactive oversight of culture/risk.