New risk culture proposal: Why risk cultures need prudence

The Centre for Risk Research at the University of Southampton has just released the first in a series of discussion documents aimed at stimulating discussion and thought leadership within the risk profession.

The document, entitled Why risk cultures need prudence is written by one of the Centre’s risk academics, Dr Alasdair Marshall, who became experienced in local government as a District Councillor in the 1990s. Written to be relevant for any type and size of organisation, the discussion paper proposes that the concept of prudence can provide a “solid foundation” for risk culture.

Dr Marshall commented: “What we sometimes now call the ‘traditional’ approach to risk management focuses on managing risks to objectives using cyclical risk management processes and risk registers. Yet recent years have seen growing interest in risk culture. It is increasingly appreciated that a healthy risk culture can help support all sorts of management activities. Getting risk culture right is therefore a vital consideration for anyone seeking to integrate risk management within their organisation. In fact, thinking along these lines can really open our eyes to more fully appreciate what ‘integrating risk management’ can mean”.

Some Alarm Members will be familiar with usages of the term ‘prudence’ within accounting or regulatory contexts. Others will regard it, as most people do, simply as cautious foresight. However, the discussion document is instead concerned with a much older and ethically richer view of prudence. Dr Marshall argues that when prudence is considered as the first of the virtues – which basically entails a fundamental concern with goodness and truth-seeking - then it starts to become clear that it can serve as a foundational term, not just for risk culture but also for ethical culture. Taking this approach, what emerges is that promoting the virtue of prudence can encourage employees to be more proactive in their contributions to risk management, to be more vigilant against recklessness and risk bias, and to better balance short and long term considerations in their decision-making. His concluding suggestion – providing food for thought for Alarm Members – is that perhaps risk managers should jettison the concept of ‘risk culture’ altogether and instead focus on training and encouraging employees to appreciate what prudence is and why it matters.

Dr Marshall welcomes feedback on his discussion document from Alarm Members, please email the Alarm Office with any comments.