Risk culture may be defined as ‘the systems, values and behaviour present in an institution that enable the employees of the institution to be risk aware and make risk sensitive decisions.’
Risk culture determines an organisation’s attitude towards risk, and it decides how people will engage/ deal with the risks they encounter in their pursuit of the business objectives.
A bank might have best of the risk management policies and tools in place, but the extent of adherence to these policies or tools will depend on the risk culture prevalent in the bank.
Risk culture goes beyond an institution’s Risk-policies and rules. It is driven by the values, beliefs and attitudes of the individuals as well as the values of the organisations.
Hence to minimise adverse events the organisation will have to develop a positive culture, which will make employees comply with the rules in letter and spirit both.
To improve compliance level in any organisation, compliance function must be supported by a ‘Positive Risk culture’ within the organization.
