Refocus on Risk to Thrive

Perspectives

Refocus on Risk to Thrive

Aligning strategy, risk appetite and culture

This report shares insights on the best practices organisations are adopting to address the challenges they have experienced aligning strategy, risk appetite and culture during the COVID-19 crisis.

The COVID-19 pandemic has accelerated many of the disruptors anticipated by Australian organisations and introduced others that could not have been foreseen. These disruptive forces have impacted organisations in very different ways. For some, it has reinforced their strategic plans, enabled an acceleration of their implementation, and driven growth. For many, it has exposed weaknesses in governance, strategy, operating models and culture.

The changes occurring are presenting opportunities, but in order to realise these opportunities we must gain comfort taking and managing risk in an uncertain environment. Of particular concern is the gap between business confidence and business behaviour. Whilst our recent Business Outlook report demonstrates business confidence is now at pre-crisis heights, there are justified concerns that Australian businesses are not backing themselves. Business lending is down, mergers and acquisition deal volumes are down, and share buy backs by listed organisations are up.

The responsibility for taking risk and guiding Australia through this period of uncertainty primarily sits with the boards of our public and private organisations. As such, they must lean into the opportunities presented, invest in the people, processes and systems that enable them to make risk-informed decisions; and build cultures that understand the value in taking risk.

This report shares insights on the best practices organisations are adopting to address the challenges they have experienced in aligning strategy, risk appetite and culture during the COVID-19 crisis. Our findings are based on interviews of 75 Directors and Management representatives from over 59 Australian organisations.

Notable strengths the report identified were:

  • 93% of participants believe the crisis presents at least some opportunity for their organisation, whilst 74% of participants believe the crisis presents a moderate to very high degree of opportunity for their organisation
  • 81% of participants indicated their board and management teams were moderately to very well aligned on the organisation’s appetite for taking risk to achieve its objectives
  • 89% of organisations made some change to their strategy in response to the crisis, yet just 54% made a moderate to high degree of change

Thematic opportunities we explore in this report include how organisations can:

  1. Align strategy, risk appetite and culture setting processes to improve their effectiveness and increase the value they add;
  2. Increase understanding of the value of risk appetite and strengthen accountability for performance within risk appetite;
  3. Improve the quality of risk data, and usefulness of risk reporting systems, to enable risk intelligent decision making; and
  4. Use risk appetite as a tool to influence employees’ behaviours and attitudes, and design a culture which will support the execution of the strategy

This report also provides tailored action plans for Directors and Management to guide their response to the insights shared in the report.

Published: January 2021

Refocus on Risk to Thrive

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