Effective risk management and the culture of an organization

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The organizational culture is the shared values and beliefs of an organization. For example, if an organization has a culture where the employees actively lookout for any adverse event to the firm, it is a part of the organizational culture. The Organizational culture lays down the correct way employees behave in the organization. For example, if it is a part of organizational culture to actively look out for market risks the employees will report market risks to the company when perceived by the employees. The organizational culture affects the understanding, perception, and behaviors of employees. For example, if the firm has an organizational culture where the employees actively lookout for fire hazards in the company, they will actively spot danger spots and report these to the management. This will reduce the risk of fire. Similarly, if an organization actively places accountability on its employees and leaders the employees and leaders become watchful, take precautions, and actively prevent risks to the company. For example, if a company makes its unit managers responsible for any loss in their units, then the unit leaders become proactive in ensuring that their units are not harmed by fire, water flooding, or theft. The result is better to risk management throughout the organization. On a wider scale, if organizational leadership is accountable for any loss in their department or divisions, the leaders develop, implement, and monitor a risk management system. For example, if the lathe division in a machine tools factory leader puts into place a risk management system. The leaders will formally take steps to reduce ...