A brave new world? Making sense of practitioner and regulator perspectives on risk culture

The risk culture of financial organizations is a popular area of focus at the current time, with regulators, advisory organizations, professional/trade institutes and financial organizations themselves all providing their view on the subject. However, despite the wealth of commentary there remain many unanswered questions, and to the extent that there is any consensus, there is a danger of overemphasizing certain elements. We provide a critical, but constructive, review of the practitioner literature on risk culture,the aim being to shed further light on some key questions. Specifically: what does risk culture do, can risk culture be modeled, is there a risk culture ideal (in terms of the elements of an appropriate risk culture) and can risk culture be regulated? We argue that there are no easy answers to these questions, and we also challenge some of the existing answers that have been provided. We suggest that to better answer these questions there is a need to look beneath the tip of the risk culture iceberg, focusing less on the more tangible and visible aspects of risk culture (incentives, risk management processes and procedures, etc.) and more on the human-social elements of organizations (such as communication networks and social relationships.