Developing a framework of institutional risk culture for strategic decision-making

Abstract

Although practitioners have long sought to define risk culture, its role in strategic decision-making is not yet well understood. This paper addresses this gap from an institutional theory and organisational culture perspective. Findings from a qualitative study in the automotive industry provide insights into the importance of risk culture in strategic decision-making. Based on the findings, we propose a framework for understanding the different factors of risk culture that affect strategic decision-making. This yields insights into the facets of risk culture and highlights the role that both the board as well as management play in driving a risk culture and fostering the values and behaviours required for enabling risk appropriate strategic decisions. Management may use the findings to define a culture that will drive risk-appropriate behaviour, create alignment for the organisation, allow for transparency and accountability and foster improved strategic decision-making.