"How to mitigate human control malfunction� Horst Simon Risk Culture Builder
Organisational control is slowing business down! • Baby Boomers built the biggest companies in history • But, they centralised all control • Decisions are taken by people • Decisions must be taken on the front-line, where BUSINESS gets done • Decisions must be risk-intelligent
Those who do not understand the risks or miscalculate the risks stand to be exploited by those who understand them better
The importance of the Human Factor in Operational Risk is mostly overlooked and the mitigation of People Risk is not a priority‌
‌ events only happen to others, not to us, our people are loyal, ethical and dedicated to their work and the company
Overview of some recent people risk issues • Diminishing ability of companies to survive without talent • Lack of Ethics and loyalty • Companies often cut the fat– and some of the muscle with it • People Risk is endogenous! • You cannot control what you do not quantify and measure
• Short-term gain • GREED,GREED,GREED
In managing Operational Risk, organisational and cultural issues ultimately pose greater challenges than the evolving technical hurdles that companies must overcome People Risk quantification was described by Toft in 1996 as: Un-measurable, subjective speculation
So, how do you assess your people risk? • We don’t • We assume that potential people risks won’t actually materialise or that their consequences will not be severe enough to merit preventative measures -we tend to harbor illusions that things are better than they really are • We are afraid of the “Ghost in the machine”* • Key issues • Risk Awareness • Risk Attitude • Risk Intelligence • Risk nervous system *Arthur Piper
People Risk in the GCC • “People are the weakest link in Continuity strategy, planning and recovery efforts” – KPMG Survey, UAE
• “It is well known in the field of information security that people are the weakest link…” KPMG Survey, UAE • “77% of employees want to change jobs for better pay”Gulf News Survey, UAE • “In the case of Qatar and the UAE… net disposable incomes have fallen sharply”- Gulf Talent Survey, GCC
• 90% of the UAE workforce are expatriate- Gulf Talent Survey, GCC
Agenda for People Risk Assessment & Mitigation • Human assets are hard to generate and especially difficult to imitate… • Dynamics of Change and the effect on people risk • How to prepare…
• The people risk management framework • How do we build this into a working plan…
Human assets are hard to generate and especially difficult to imitate… •Staff quality and experience •Ability to execute strategy
•Problem-solving ability •Capability to use skill sets •Self-learning to improve skill sets •Employee loyalty
Dynamics of Change Level of change
Gradual Change
Increased pace of change
Dynamiccontinuous change
Frequency of change 2020
“In a world where change is the only constant, success depends on the depth of our awareness of the risks and rewards on the horizon and on the quality of our preparations to respond to them appropriately� Jaime Caruana, Chairman of the Basle Committee, Hong Kong, 7 February 2005
It is not just what you know, but what you do with what you know
Constant change increases People Risk… •Intense competition for individuals capable of leading business organizations
•Requirement for extraordinary strategic thinking skills •Major lack of experienced staff •Requirement to make high-quality decisions quickly in the face of competitive pressure •Highly refined communication and talent development skills •Employee attitude is everything!
“Individuals are changing jobs much more regularly than before and each time the regard they hold for the company diminishes…. work is becoming a series of money making access points” Andy Law-in his book Experiment at work
Prepare for this change by building a robust people risk framework and process… • Introduce a systemic evidence-based way of doing this with tools that are easy to use • Visible and transparent • Rigorous and challenging enough to provide trustworthy results and encourage continuous re-invention • People are the key to great business results • Develop new skills with existing people
Do not experiment with people risk… … know what you are doing so it does not blow-up in your face… this is the real game, not a dressrehearsal!!
What Now?
Five Pillar Methodology
Competency Framework The Right Policies
Spiritual needs
Actualization
Leadership
PEOPLE RISK MITIGATION
Bob Diamond, former Barclays Chief Executive, said in a speech last year: �For me the evidence of culture is how people behave when no one is watching�
This year…… In testimony before a British parliamentary committee, the disgraced CEO of Barclays, Robert E. Diamond Jr., had a familiar excuse for reporting deceptive data on interest rates: The other guys were cheating, too, so we had no choice. “A number of banks were posting rates that were significantly below ours that we didn’t think were correct,”
• “…businesses are only collections of people and a mass transformation of attitude and behavior would lead to super-fast change…only leaders can instigate this” • Andy Law-in his book Experiment at work
Maslow's Hierarchy of Needs It is all about themselves!!
1954
Spiritual needs
“In the workplace of the future, the fiercest competition may not be for customers, but for the hearts and minds of employees” “The Economist” 1993
1993
“People here who are part of the workforce need to be more tolerant, patient and prove their capabilities and understand the other point of view. Many switch off instead of addressing a problem or a strained relationship with a manager and this only makes matters worse.�
“I am very grateful to have a job here, but I cannot do what you have asked of me. Because it is wrong. I cannot dishonor my God or my family by lying on the report� Javier Martinez- from the movie Courageous
The Right Policies
• In a bad risk culture, people will not do the right things regardless of risk policies and controls • In a typical risk culture, people will do the right things when risk policies and controls are in place • In a good risk culture, people will do the right things even when risk policies and controls are not in place
The Right Policies
• In an effective risk culture every person will do something about the risks associated with his/her job on a daily basis • In the ultimate risk culture every person is a risk manager and will evaluate, control and optimise risks to build sustainable competitive advantage for the organisation At what level of maturity is your organisation?
Competency Framework
Competencies emerged in the 1980s as a response to organizational changes and to wider changes in society. In 1982 the US academic, Richard Boyatzis wrote The competent manager: a model for effective performance. This book proved to have considerable influence on the profession and, over the following two decades, competency frameworks became an increasingly accepted part of modern HR practice.
The only way to change culture is to change behavior •
• •
Your Attitude determines the Atmosphere Your Values guide the decisions Your level of investment in your People determines the returns- the Harvest is a direct result of the sowing.
The only way to change culture is to change behavior •
• •
Your Character determines the level of Trust- the pass mark for trust is always 100% Your Work Ethic determines the levels of Productivity Your own Growth determines the Potential of your People
PEOPLE & Risk Culture CULTURE
STRUCTURE ROLES
TASKS
Level of effort
BEHAVIOUR
Some more thoughts… •Ethical Corporations will shape our future values •Alignment of compensation and benefits to staff needs •Cash, cars & cell-phones •Medical aid- the young, the old & the needy •Population trends •In 2011 the Baby Boomer front runners start turning 65, they are expected to live until age 83 and in excess of 70% will be commercially active, what are these “active seniors” going to do? 32
Track staff turnover, know its costs and convey that to management to support the business case for retention
“… few companies bother to measure their investments in human capital or the return on these investments”
2003
Outlook, Accenture, May 2003
“ Human capital appreciate in value only if looked after and trained properly. They are incredibly flexible and inventive if given the right motivation and confidence. They have untapped potential which can be discovered if allowed to flourish � Andy Law-in his book Experiment at work
And you are still not considering this important… • You cannot transfer reputational risk
• You can never take the human element out of risk management • Every employee is a potential risk manager– just train them • Do not make people risk a post-event affair– be proactive
How should we look at People Risk?
“If everything seems under control, you’re not going fast enough” Mario Andretti
The Risk NERVOUS system
The Risk NERVOUS system •Collect people risk intelligence from everywhere! •Build internal pathways throughout the organization •Clear and unobstructed communication •Bad news must travel faster than good news- to better anticipate action needed and thus avoid/mitigate pain or loss
•Practice pro-active people risk management
Final thoughts “The reliability of business operations at financial institutions (and other companies) depends to a large extend on the expertise, discipline and morale of each employee in these institutions. Efforts to maintain and improve this aspect remains a major issue”
Bank of Japan
“You cannot solve a problem using the thinking that created the problem in the first place” Albert Einstein
The comments made in this presentation are the views of the presenter and does not necessarily reflect any processes or policies of any companies or organisations he is connected to.
chungarisk@yahoo.co.uk
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