The world of finance is nothing if not risky. However, when a risk culture is instilled in your organization, you can set the stage for long-term sustainable growth.
When risks are anticipated and assessed, a business can strategically seize new opportunities while avoiding costly mistakes. To that end, 20 Forbes Finance Council members share key benefits they’ve experienced from creating a strong risk culture. Here’s how embracing risk can not only safeguard a business but also drive innovation and success.
1. Fosters A Shame-Free Environment
Perfectionism breeds complacency, which leads to stagnation. But this is a false notion. No one can be “perfect.” Instead, create a culture where mistakes can be made without shame or retribution. This encourages innovation without risking your status or job. With appropriate guardrails, this promotes continual improvement, resiliency and a much better culture where people can thrive. – Chris Scharman, Avtech Capital, LLC
2. Creates More Learning Opportunities
Instilling a risk culture will not only allow people to learn more about a topic but will also allow them to make calculated investments. Real estate is a prime example and while investing in any form can be risky, it seems that real estate is the least risky of all methods for obtaining quick equity and/or a return on initial investment. – Brenna Carles, The Mortgage Shop
3. Builds Trust And Transparency
Discussing potential risks should be a regular part of management meetings, as it helps safeguard financial stability and supports more informed decision-making that aligns with the company’s goals. A strong risk culture fosters transparency, builds trust and enables companies to identify and address risks that could negatively impact stakeholders, ensuring long-term sustainability and success. – Nike Ajao, OneBarrow Corporation
4. Supports Innovation
An organization that regularly discusses risks can more effectively prevent and mitigate risks. Counterintuitively, discussing risks can also be conducive to innovation. In the venture capital industry, which invests in innovative startups, it is quite common to discuss the risk of an investment as a necessary part of the process. – Daniele Viappiani, GC1 Ventures
5. Enhances Resiliency And Reputation
Instilling a risk culture in a company offers numerous benefits: improved decision-making, proactive risk management, enhanced resilience in the business and increased accountability. This will also lead to an enhanced reputation, which in turn means cost savings and encourages calculated risk-taking for growth. As a result, you will see better employee engagement and long-term sustainability. – Ali Firoozi, The PAC Group
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6. Makes A Team More Adaptable
Risk culture is super important to implement in an organization. It empowers people in the organization to think about risk management and how it may affect the day-to-day operations. One word that comes to mind is adaptation. It will help with making fast decisions and pivoting when needed for the best outcomes. – Will Murphy, Everlasting Capital
7. Encourages Collaboration Among Departments
Instilling a risk culture allows for alignment across the enterprise. Oftentimes, the risk department is viewed as being too conservative while the business lines are too aggressive. Instilling a balanced and calculated risk culture across the enterprise will give everyone the same framework and language to work from, which in turn drives better collaboration and business outcomes. – Alvina Lo, Wilmington Trust
8. Nurtures Creative And Critical Thinking
Risk culture requires “out-of-the-box” thinking to predict the unpredictable and address “what could go wrong.” Instilling a risk culture encourages and nurtures creative thinking and critical analysis. – Jonny Frank, StoneTurn
9. Mitigates Threats And Instills Confidence
Instilling a strong risk culture empowers organizations to make more informed, strategic decisions by embedding risk awareness into every level of the business. This proactive approach not only mitigates potential threats but also uncovers opportunities, leading to more resilient and adaptable operations. A robust risk culture fosters long-term sustainability and enhances stakeholder confidence. – Peter Goldstein, Exchange Listing LLC
10. Harnesses Growth Potential
For many professionals, school teaches them to avoid failure and risks at all costs. This leads to low risk-taking and bureaucratic slow or nonexistent growth. By encouraging risk-taking with adequate due diligence done beforehand, now a company can harness startup-like growth. – Leo Kanell, 7 Figures Funding
11. Promotes Cross-Communication And Alignment
One of the benefits of instilling a risk culture is that it promotes better communication and collaboration across departments. By focusing on risk mitigation, teams are encouraged to cross-communicate, ensuring that potential issues are addressed proactively. This shared responsibility fosters transparency and alignment, ultimately leading to more informed decision-making and stronger outcomes. – Chris Seveney, 7e investments
12. Enhances Due Diligence
A benefit of risk culture is enhanced due diligence. At our firm, we say we can tolerate risk, but we can’t tolerate uncertainty. Therefore, we leave no stone unturned before making a decision. – Ahmad Ashrafi, Infinity9 Investment Group
13. Guides Decision-Making And Team Actions
Instilling a risk culture influences the decision-making processes at all levels of your organization, ensuring that risk management policies are not only implemented but are also effectively guiding the actions of your employees and management team. This alignment is crucial for sustaining long-term organizational health and success. – Robert W. Bache, AmeriLife
14. Forms Leaders And Trailblazers
Yesterday I shared with a colleague that I was getting ready to make a big mistake or reap the rewards of taking a chance, and either outcome was okay. Stagnation happens in a risk-averse culture. Thought processes are removed and ideas are squelched. Growth happens in a risk-tolerant culture. Risk-tolerant cultures open the door to creativity, trailblazing and decision-making. Leaders are born here. – Cynthia Hemingway, Fourlane, Inc.
15. Improves Performance
Organizations that embed a risk culture tend to outperform. This is not because they make “risky” decisions, but because the risk culture allows for unique and uncorrelated thoughts. Those ideas can then be filtered, selected and acted upon as appropriate. In my view, it is worse to have an opinion and not say it rather than to have no opinion at all, no matter how non-conformist that idea is. – Manoj Jain, Maso Capital
16. Establishes A Culture Of Responsibility
The main advantage of establishing a risk culture within your company is that it encourages proactive decision-making and long-term stability. Employees become more aware of potential risks and are empowered to recognize, evaluate and manage them promptly. This mindset not only helps prevent potential threats from escalating but also cultivates a culture of responsibility. – Corey Digi, Lexington Capital Holdings
17. Allows For Strategic Prioritization
A culture that embraces risk is one that understands how risks impact and don’t impact customers, employees, operations and finances. A risk culture has the ability to communicate transparently by identifying and classifying potential risks, prioritize strategically with calculated risks, invest in the mitigation of medium or high risks and experiment to innovate rapidly as key risks are mitigated. – Shannon Power, Scope AR
18. Helps You Think Ahead And Manage Issues
Instilling a risk culture helps everyone in a company think ahead and manage problems better. It means people are more aware of potential issues and can spot them before they become big problems. This proactive mindset can save the company from costly mistakes and make it more resilient. – Ivan Lunegov, Olimp Capital Partners
19. Allows Teams To Take Advantage Of Opportunities
To help top-level management overcome risk, we recommend keeping a cash reserve equal to 10% of revenue in the bank at all times. This allows your team to not only mitigate risk but also take advantage of opportunities that may come their way. Having that cash reserve essentially puts you in a better spot to make riskier decisions. – Jody Grunden, Summit Virtual CFO by Anders
20. Makes Organizations More Adaptable
Organizations that instill a culture grounded in the strategic navigation of risk—beyond just risk mitigation—will be better prepared to adapt to changing marketing conditions and regulatory environments. In this culture, risk evolves from a “check-the-box” function to one that can help steer the organization in terms of strategy and growth. – Mike Whitmire, FloQast
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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