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The one bad apple spoiling the barrel has become a common metaphor to describe risk culture in organisations. This ‘inside-out’ perspective begins with the individual as the unit of analysis and follows with inferences to the broader environment. Since the global financial crisis (GFC) of 2008, risk culture for many has become the explanation for shortcomings, poor decisions and moral failures in organisations. We present an institutional perspective of some of the forces that shape risk culture in organisations.
How does “Tone at the top” travel from the board room to the rest of the organisation? While the qualitative description of tone at the top provides a noble and virtuous vision for guiding or changing risk culture, the mechanisms for actualisation are less clear. There has been a revival and emphasis of tone at the top after the Global Financial Crisis as it became widely espoused as both an explanation and a solution for the crisis. Tone at the top continues to symbolise risk culture maintenance and improvement for firms and their regulators. However, the processes and structures that are relevant to transmitting and propagating culture and values espoused by the leadership of the firm have been less explored.
We study the impact of charisma and strength of connections on transmission and persistence of culture in a given social network structure. Specifically, we analyse the effort to change culture in a firm by looking at communication effectiveness of opinion leaders throughout the firm; while influential, they are secondary to the board but act as “repeater stations” in transmitting the tone set by the board. This is a refinement of the classical approach to culture (Schein, 1990) which tends to focus more on messages from senior leaders, consistent with tone from the top, but without accounting for the social network of the firm’s staff.
We present a risk culture model using an agent-based algorithm which considers how the structural patterning of risk culture varies with the influence levels of opinion leaders given the social network in the organisation. To complement the hypothesis, we highlight the indicative relationship between the charisma and strength of connections of opinion leaders versus the survivability of risk culture in an organisation.
Risk culture warrants a broad and multidisciplinary view. Our authors have provided insights and brought new thinking to this topic as an antidote to approaching the subject with linear thinking and prescriptive solutions. Their chapters provide multiple lenses for understanding and exploring risk culture as an organisational phenomenon.
The one bad apple spoiling the whole barrel has become a common metaphor used with reference to risk culture in organisations. This “inside-out” perspective begins with the individual as the unit of analysis and follows with inferences to the broader environment. Since the Global Financial Crisis (GFC) of 2008, risk culture for many has become the explanation for shortcomings, poor decisions, and moral failures in organisations. This volume presents an institutional perspective of the forces that shape risk culture, and culture more generally, in organisations through a multi-disciplinary examination from a variety of leading academics and subject specialists. The authors demonstrate that firms play a role as manufacturers and managers of risk and they challenge common conceptions that attribute risk to chance circumstances or rogue behaviours. The foundational concepts needed for an institutional view of risk culture are highlighted with subsequent links to significant developments within society and firms.
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