Academic journal article ABA Banking Journal

Culture as a Defense

Academic journal article ABA Banking Journal

Culture as a Defense

Article excerpt

You won't find the word "culture" in the cover story on "lines of defense." The article covers OCC's heightened regulatory focus on risk management and compliance and especially its three lines of defense: the front line, risk management, and internal audit. The overlay to all three is governance, which comes closest to the concept of "corporate culture."

That phrase conjures up a raft of behaviors and practices and there are numerous articles, books, and courses dedicated to exploring the subject.

I am no expert on corporate culture, but I was struck by its relevance to risk management. As a long-time observer of the banking scene who has had countless conversations with bankers, I'm convinced that an organization's culture reflects its leadership. And that's true no matter if the organization is a 23-employee community bank or a 200,000-employee global bank.

A simple example: If a bank's CEO emphasizes careful control of costs, and is thrifty in his own spending--a key point--that message will spread throughout the organization.

To become ingrained, the message must of course be enforced so that people realize that they can't willfully ignore the company's expense culture. Eventually the company will become known for being thrifty, and for a time that culture will be self-perpetuating. When that CEO leaves, however, and is replaced by another who says the same things but is careless with expenses, the culture of cost control will erode.

This is not to say individuals cannot be thrifty (or whatever) of their own volition, but overall, most people are followers. This is why it is so critical for a leader to clearly set the tone and, most importantly, the example of what they wish people working for them to do. …

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