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In this series of five articles, we will explore the importance of risk culture, distinguish the risk culture from the organisational culture, look at the drivers for good and bad cultures, discuss the measurement of culture, look at the symptoms of a sickly risk culture and draw some conclusions. Links to the other articles in the series can be found at the foot of this page.

Name a corporate crisis, any corporate crisis, any from that massive wall of shame that starts in the dim and distant past. Choose the South Sea bubble (1720) or Volkswagen (2015) or something in between: the Savings and Loans crisis in the United States of America (1986 to 1995 – surely one of the most prolonged “crises”) Polly Peck (1990), or Maxwell (1991),  Enron (2001), Marconi (2006), the banking crisis (2008), BP (2010),  HSBC (2012), Wal Mart (2012), Tesco (2014). Choose any one of them and it is likely that one thing will stand out over this almost 300 year vista: there was something rotten at the core of the businesses and the boards did nothing about it.

The South Sea Company (officially known as The Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of fishing – at least the names got snappier…) had noble intent at the outset. But then it is probably true to say that not a single one of these organisations was set up to deceive regulators, harm investors, pensioners, suppliers, customers or whole communities. Yet they did exactly that: from 1720 right through to 2015. And no doubt the seeds of the next corporate failure have already been sown and will be reaped in short order.

Reams of paper have been printed and then pulped on Corporate Governance: COSO (in several varieties) in the United States of America, CoCo in Canada, the three King reports of South Africa, Cadbury and many, many more reports, guidance notes and hints from a plethora of bodies in the UK, and the EU publishes guidance and new directives on Corporate Governance like it is going out of fashion. But for all of the publications that have been printed (and most of which have been pulped) there are still new corporate governance crises emerging right round the world.

There is a small glimmer of hope, although it is one which could easily be snuffed out unless it is nurtured carefully. There has been a recent shift in focus from many regulators and standard setters: while they are still focussing on the minutiae of process and evidence-based recording of process, there is a glimmer of hope in the new attention being paid to organisational culture. But the proposition set out here is that most tomes of new corporate governance guidance will continue to fail because:

  • Investors, and therefore Management, are obsessed by short term financial return at the expense of external implications;
  • As a consequence few people yet recognise the difference between organisational culture and risk culture;
  • Directors (and others) are unable effectively to measure culture; and
  • Few people can say with any precision where and how real values deviate from espoused values, or indeed identify many of the other common problems.

In the second part of this five part series I explore the differences between the two cultures and what drives them. If you would like to know more about these issues, continue reading here:

If you would like to discuss this further, please feel free to contact us here.

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5 Responses to Part 1: 300 Years of Failure: Organisational and Risk Cultures

  1. […] 300 years of failure: organisational and risk cultures, I expressed the hope that risk culture (as distinct from organisational culture) was beginning to […]

  2. […] this series of articles, I have looked at the background of 300 years of failure, the tensions between long and short-termists, some of the issues in measuring your culture and the […]

  3. […] Part 1: 300 years of failure […]

  4. […] to catastrophes: witness Volkswagen, and many more of the organisations that I cite in my article 300 Years of Failure. Surely it is more than your personal and corporate reputations are worth not to get to grips with […]

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