Companies & Industries

Managing Risk in the Era of Behavior


It's not all about rules and regulations. Successful risk management means changing corporate cultures and the individuals within them

We are increasingly connected and interdependent. We live and work continents apart but are still in each other's backyards—that's why high-risk mortgages in Arizona and Nevada can destabilize Iceland's economy, for example. Meanwhile, our systems of corporate governance and controls have not kept pace; they're still figuring out past mistakes but failing to anticipate change or enable adaptability. After years of perfecting business processes, squeezing productivity, and trying to commandeer compliance, the time has come to look for ways to unleash the very best and inspire people to come together, create change, reach across the table—and across borders—to tackle some of our biggest problems. This has substantial implications on how organizations and their leaders anticipate and assess both risks and opportunities. As business has grown more complex, we have developed elaborate protocols, systems, frameworks, and approaches to manage risk. A consequence of putting science at the forefront of these risk management systems has been a stripping of human behavior out of the risk model. The future of risk management lies in an ability to incorporate and inspire more of the behaviors we want, finding new models to map, monitor, intervene, support, and react to the behaviors of individuals and groups—both the behaviors we want to encourage and those we'd like to avoid. Critically, this taking account of behavior means we need a much sharper comprehensive strategy for corporate culture, so that our models are founded on the way "things really happen around this place." Please click here to see a slide show that outlines the seven areas of risk management businesses should pay the most attention to today.

David Greenberg is executive vice-president at LRN, a company that helps businesses develop ethical corporate cultures and inspire principled performance.

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