New EY research reveals that some boards may be overlooking a vital ingredient of business success: culture. Just 22% expect that a misaligned culture will more than moderately impact their business in the next 12 months. In other words, culture is the risk category boards are least concerned about.
And boards are not alone. Even fewer CROs (11%) expect misaligned culture to more than moderately impact their business in the next 12 months. And according to the EY CEO Imperative study, CEOs rank culture and purpose as their lowest priority area for change in the next three years.
Complacency in this regard can introduce undesirable risks. When aligned with the organization’s purpose and supported by leadership, culture serves to protect and create value. When it isn’t aligned, risks increase, and potential value is left on the table. Companies that lead in risk management understand this.
The EY Global Board Risk Survey 2021 found that 80% of companies leading on risk management often or always talk about the culture needed to support the organization’s strategy at board meetings. In comparison, 63% of organizations that are classified as “developing” in their risk management approach do the same.
How can your organization join the leading group, if it isn’t there already? As part of our Board Imperative Series, we offer four ways that boards can govern culture and enhance risk management:
- Align corporate culture to strategy, and recognize when your culture should evolve
- Consider how your culture is communicated and reinforced
- Ask your management team to measure and monitor progress on culture
- Carve out enough time to discuss culture at board level
Align corporate culture to strategy, and recognize when culture should evolve
Misalignment between culture and strategy is the greatest culture and workforce-related challenge when it comes to risk management. A corporate culture that is inspired by the company’s purpose and aligned to its strategy enables and accelerates that strategy. Culture also is a critical component of enterprise risk management: it influences how an organization identifies risk, what types of risks it accepts, and how it manages risk. A misaligned culture can introduce additional risks.