How can you create a risk-aware culture without stifling innovation?

This step is about setting the boundaries for how much risk your organization is willing to take. It considers factors like your industry, company size, and financial health. Example: Let’s say your company is a well-established financial services firm. You might have a lower risk appetite than a startup creating a new fitness app. This would mean the financial services firm would be more cautious about taking risks that could lead to financial losses.

This step is about creating a safe space for employees to identify and report potential risks. This could involve setting up a risk management system or simply having regular team meetings where employees feel comfortable discussing concerns. Example: You could create a risk reporting hotline or email address that employees can use to anonymously report any risks they see. You could also hold regular team meetings where there’s a standing agenda item for risk identification.

Can be incentivised for proper reporting in the form of additional marks in appraisal, etc. And to improve accountability, non reporting can be punished by way of lowering appraisal marks based on severity of the risk event..

This step is about making sure that employees feel responsible for managing the risks they identify. This doesn’t mean they have to solve the problems alone, but they should be accountable for bringing them to the attention of the right people. Example: When an employee identifies a risk, you could assign them the task of coming up with a plan to mitigate it. This could involve working with a team of other employees or with senior management.

The first step for any organization to build a strong risk-aware culture is to train/ conduct workshops for its employees on the importance of being aware of the risks involved in the business along with the repercussions of being unaware of risks or of being risk-averse. It is a continuous but important aspect of building a strong risk-aware culture. Apart, from training, an organisation should be clear about its risk appetite and the dialogue should reach the grassroots. Being part of a Bank for the past decade, I observed that the unaware workforce is often the biggest threat to managing risks efficiently and effectively.

This step is about creating a culture where employees are encouraged to learn from mistakes and take calculated risks. This could involve providing training on risk management or simply having a leadership team that is supportive of innovation. Example: You could create a “lessons learned” database where employees can share information about risks that have been identified and mitigated. You could also offer training on risk management best practices

This step is about making sure that your risk management and innovation processes are aligned. This means that you should consider the potential risks of any new ideas before you move forward with them. Example: You could create a risk assessment checklist that all new ideas must go through before they are approved. This checklist would help to identify any potential risks associated with the idea and develop a plan to mitigate them.