Risk culture development and its impact: the case of the Caribbean Development Bank

Abstract

Previous risk culture research has concentrated on the regulated commercial banking and insurance sectors in developed economies. The paucity of studies for developing economies has prompted this research. The objective of this paper is to examine risk culture development and its impact within the Barbados-based Caribbean Development Bank. Given the unregulated nature of development banking, it was anticipated that the risk culture environment within this type of institution would be different to the risk culture environment inherent in regulated entities and will provide a good platform for new findings. Primary data were collected via an interview with the Chief Risk Officer in August 2015 and a three-month field observation at the Bank. The paper utilizes the KPMG risk culture maturity model in conjunction with an adapted version of the Horst Simon risk culture maturity scale to classify the maturity level of risk culture within the Bank. An important finding from the research is that accountability, awareness, communication and leadership have become strong indicators of the Caribbean Development Bank's risk culture and have contributed to increased uniformity in risk management knowledge, improved coordination of risk data collation and better escalation of risk management issues. Thus, there has been enhanced efficiency of risk management practices within the Bank.

A scale for measuring organizational risk management maturity in the supply chain

“…This has implications for theory; SCRMM appears to be more complex than a simple set of main dimensions. While studies have been published that developed maturity models, even those considering risk management (Florio, 2017;Spr ci c et al, 2017), these have generally focused on specific industries, projects within organizations, or processes internal to the organization ( Cech and Janu ska;Wood and Lewis, 2018;Spr ci c et al, 2017;Bendul and Skorna, 2016). Risk management constructs have even been advanced for aspects related to the SC (Ambulkar et al, 2015;Wang and Suhaiza, 2011;Thompson, 2009).…”

Banks’ risk culture and management control systems: A systematic literature review

“…On a conceptually basis, several scholars develop and discuss comprehensive frameworks to foster banks' risk culture, which highlight learning from failure, organizational resilience and corporate governance as more general aspects, but also individual responsibility and supervision (which are related to action controls), remuneration systems (which constitute results controls) as well as training, recruitment and knowledgeable leaders (which are components of personnel controls) (Bott & Milkau, 2018;Cordery, 2007;Drennan, 2004;Drummond, 2002;Gontarek, 2016;Jackson, 2015;McConnell, 2013;Srivastav & Hagendorff, 2016;Wood & Lewis, 2018). Young (2011) adds the concept of high-reliability organizations to the discussion.…”

“…To cease dysfunctional developments with respect to risk culture, scholars stress the importance of embedding risk culture in an overall fitting organizational context (e.g., Bott & Milkau, 2018;Gontarek, 2016;McConnell, 2013;Wood & Lewis, 2018). In order to achieve this goal, literature provides many instruments which can be categorized into one of the discussed management control categories, e.g.…”

The Influence of Enterprise Risk Management Practices on Organizational Performance: Evidence from Kenyan State Corporations

“…To further support the above notion, Kpodo and Agyekum (2015) found a positive correlation between risk culture and organizational performance in the Banking Industry in Ghana. Besides, Wood and Lewis (2018) found that communication, awareness, accountability as strong pointers of Caribbean Development Bank's risk culture which contributed to improved uniformity of risk management knowledge, coordinated collation of risk data and better appreciation of risk management issues. Consequently, risk management practices were enhanced within Caribbean Development Bank.…”