"Many managers and/or bosses don't often appreciate the importance of how their own acting influences their employees' behaviour, which might result in misconduct as well. Thus, we want to increase this awareness. … Therefore, BaFin (German Federal Financial Supervisory Authority) decided to enshrine the requirement of an appropriate risk culturein the MaRisk (German Minimum Requirements for Risk Management)." (Ira Steinbrecher, Policy Issues Department BaFin, in: Die Bank 3/2017). This is the very point of what is at stake in the banks' risk management in these days. It's not just about sophisticated strategy papers and risk management alone, but it's moreover a matter of everyday's interaction within the company. Of risk culture simply.
What's this - Risk Culture?
First of all, corporate culture comprises all that, what is self-evident in the company. What is hardly questioned or even not at all. "Because it's the way to do so." This probably includes that nobody dares to object to the boss, who takes autocratic decisions. This is not a problem as long as it refers to the destination of the annual works outing. But if it's a question of credit decisions or sensitive customer data, this could be fatal. In terms of risk actually.
Therefore, management culture is an indicator for an appropriate risk culture. The focus is however not on the so-called "tone from the top" but on the "tone from the middle", thus on employees in all leadership positions. The examples that they set, their "normal" behaviour towards the employees in everyday working routine, this is what becomes established as corporate and/or risk culture in all employees' minds.
Let's again have a look at what Financial Supervisory Authority states in this respect: "Risk culture can be described well by means of behavioural patterns, which are typical for the respective institution, e.g. to what extent it is normal to speak about own errors, colleagues approach each other with respect to misconduct, they admit doubts or there is opportunity to discuss dilemmas. Certain risk potentials sometimes result from describing such patterns.“ (Moritz Römer, specialist for behaviour and culture at the Financial Supervisory Authority of the Dutch Central Bank DNB, in: Die Bank 3/2017)
So, there are all the relevant elements that a bank should take into account, when analysing and designing their risk culture. Pretty new stuff for many bank managers. Particularly, when dealing with this issue that is so difficult to understand - the corporate culture. How to manage such a task? How to find a productive solution? Why are management principles and value catalogues not sufficient? How to change employees' behaviour and perception? How to design open and transparent communication and decision trees? A lot of questions. But readers of my MINDFUL-BLOGactually know: there is always the Mindful Solution as well!
"How can a company be led to more mindfulness, in order that awareness is kept, where it is useful and promotes development? … We need powers of concentration, focus and persistence, emotional intelligence and capacity to cooperation …“ (Chris Tamdjidi, Managing Director of Kalapa Leadership Academy, Cologne). These are the approaches for creating a living risk culture.
6 Approaches for a new #RiskCulture
When considering the concept and the experience of "High Reliability Organizations", HRO, see also Special Edition of ZfgK (banking magazine) 20/2016, in this regard, you will clearly recognise 6 approaches for designing a living risk culture. Where mindfulness plays a decisive role.
When mindfully reflecting the decision-making process,it is also required to deal with failuresin an open and honest way. Any such open mindset can be trained by means of mindfulness. In order that you never ask the "why" question as regards failures, but better use the "how" approach. And instead of seeking the guilty or responsible parties, you'd better identify the weak points of communication. This also requires to practise how to deal with intuition in a reflected way. As intuitive decisions are not bad per se, but they need to be filtered additionally. All this can be practised by means of mindfulness.
Learning how to cope with complex issuesproductively. For this purpose, you need the important "view from above" for recognising structures and patterns. You have to keep your mindset variable and you must not get stuck in old experiences. You should also ask the team before deciding: "Do we all see the same scenario?" You must become sensitive for different realities hidden in everyone of us. Even in the VUCA world, this capacity is material!
Paying particular importance to interfaces between corporate departments.Just between "market" and "risk". Open cooperation is essential, but needs transparency. Take care: how much information gets lost at these interfaces? How do teams communicate between each other - can the required "critical dialogue" be implemented? How successful is "listening"? - one of the most important skills of managers and a core element of risk culture!
Ability to cope with high pressureeven in challenging times. How do you and your employees take decisions under stress? Do you know your "blind spots"? Mindfulness practice helps to handle both in a productive way. This provides you the ability to find the weak points in communication and not only to seek the "guilty or responsible" ones.
Listening "downwards". As early warning signals often come from there. Being able to ask the right questions is an essential ability, as important as being able to listen. Addressing fears accurately. For this purpose, you need appreciation and trust. Both are core elements of an appropriate risk culture.
Not losing innovation power. This belongs to risk culture, too. In particular, the ability to solve problems creatively. How you can get the required flexibility - especially in your and your employees' mind! - you can learn this in the course of mindfulness practice.
It's clear that #riskculture does not replace risk management by no means, but it supplements it. As risk culture provides for lived risk awareness that integrates all risk aspects naturally in managers' and employees' everyday working routine. Without paralysing them! In this way, the #mindfulness concept along with the experiences of High Reliability Organisations helps to obtain a new approach to risk culture in banks. Well, simply the "#MindfulSolution".
With kindest regards,
Yours,
Friedhelm Boschert
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