In a climate of volatility and uncertainty, it is key the business cultivates a strong corporate culture – from top level all the way down through the organization. By making culture a regular item on the board agenda, directors can help to ensure that culture supports the business strategy.
Given the importance of maintaining a healthy corporate culture in a challenging business and risk environment, the Audit Committee Institute interviewed directors and subject matter experts from around the world to gather their perspectives on the board’s role in helping to reinforce, assess, and oversee the corporation’s culture. Sharing their insights will hopefully help you to facilitate robust boardroom discussions about the challenges and opportunities related to corporate culture oversight in your own organizations.
While their individual views offer varying perspectives, some universal takeaways emerged from the discussions that should be worthwhile for all boards to consider. Here, we summarize the key interview insights:
In fact, strategy and risk management are critical drivers of organizational culture. At the onset, there must be alignment between the overall business strategy and the risk appetite statement that defines acceptable risks. The selection of key performance metrics and targets also influences culture and behavior. For example, if the targets for sales and profits are too aggressive, that may motivate excessive risk taking. During the execution of the strategy, there may be natural conflicts between strategic goals and risk management constraints. How does management resolve these conflicts? The board should be concerned not only about what business results are produced, but how they were produced.
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