Middle managers may be much maligned, but they hold the key to the development of risk management culture in large organisations, according to Australia’s leading risk executives
MIDDLE MANAGERS may be much maligned, but they hold the key to the development of risk management culture in large organisations, according to Australia’s leading risk executives.
While senior executives and the board at many organisations have stepped up their risk management responsibilities, middle managers present a barrier, according to soon-to-be released research from KPMG. One chief risk officer told KPMG “no matter what we did we found the middle managers were the hardest to convince of the value of managing risk”. Implementing risk management culture has become a key change management issue since the National Australia Bank rogue trading scandal in 2004 saw that bank’s corporate culture assassinated in the media.
Maurice Pagnozzi, Asia-Pacific partner in charge of KPMG’s enterprise risk services practice, said without support from middle management, truly integrated risk management with a complementing culture will be hard to achieve.
“If you take it from an internal perspective you have to look at three different layers of an organisation,” he said. “The board and executive should be in the same tier, then the middle management and then those out in the field. The top tier has to drive the want and the need to have this initiative drive some business performance rather than just tick the box. That tone at the top will drive the approach going forward and the investment dollar they want to put in as well. With middle management communication and awareness is key and my view is that without their buy-in, the process will fall over anyway even with the right tone at the top.”
He added that while middle managers see risk management as an additional and onerous activity, risk executives can persuade them otherwise. “Most boards I’ve spoken to have this at front of mind,” Pagnozzi said. “Executives are also there, but it’s that middle management that’s a tough cultural battle. If we can get a position of culture that says its not extra work, but just fine tuning and formalising what is already being done, it can add some value.”
Another chief risk officer told KPMG that embedding risk management between executive level and operational staff is a major challenge, not just locally but beyond Australia.
KPMG’s research, which involved detailed interviews with risk chiefs from some of Australia’s biggest companies, found that the initial impetus for many firms’ risk management development was regulatory compliance.
