1. Why is it difficult to create a risk management system that works?
Professor Philip Linsley
The University of York

2. A discussion of specific difficulties in risk management
Particularly focusing on risk culture
And the ideas of Mary Douglas
Cultural theory of risk
Neo-Durkheimian institutional theory

3. Risk management is easy
RISK MANAGEMENT SYSTEM Identify any risks that can affect the company Decide which risks are important Manage the important risks Keep checking for new risks

4. RISK CULTURE
Our individual attitudes to risk and risk management Following global financial crisis numerous organisations talk about risk culture

5. BASIC IDEA OF MARY DOUGLAS Cultural theory of risk proposes: “selective attention to risk …” (Wildavsky & Dake, 1990, p.43)

6. Foundation of Douglas’ risk ideas
Maintenance of stability
Each society wishes to ensure that it defends its structure
We are social beings
Each society wants to defends its particular
pattern of social relations

7. Two dimensions
GROUP
Degree of commitment to other people in the community
Low (weak) group = little commitment to others and your own aims are more important than the aims of the group
GRID
Amount of social regulation
Low (weak) social regulation = free to select your role in society

8. RESULT IS FOUR OUTCOMES
Two dimensions
Weak or strong group
Weak or strong grid
RESULT IS FOUR OUTCOMES
4 Solidarities
4 Worldviews
4 Ways of life
4 Cultures

9. Grid-group model Fatalist Hierarchy Individualist Egalitarian
Increasing grid
High or strong
Weak or low
Weak or low
High or strong
Adapted from Douglas (1978)
Increasing group

10. Four perspectives on risk management
PRAGMATISTS
Look to keep options open and adapt strategy as uncertainties arise
All risk management systems will eventually be found to be inadequate
MANAGERS
Careful balancing of risk and reward
Preference for comprehensive risk management system
MAXIMIZERS
Comprehensive risk management systems impede innovation and risk-taking
Accept losses may arise but over time profits will more than match losses
CONSERVATORS
Look to avoid losses
Based on judging the world as a very uncertain place
Underwood and Ingram 2010

11. Risk management in the City of London
Effects of the financial crisis affecting all lives
Project interviews middle ranking bank employees to understand their lived experience
Investment banks in City of London

12. “ Everyone thinks it’s lots … guys getting drunk in the City and just buying ten thousand bottles of champagne. Whenever you see a movie or a TV show or something about The City all the girls are wearing designer clothes … and they’re all going off to parties, which isn’t really the case for ninety percent of the people”.

13. Examples of problems
“The other day we had lost 51 billion out of our portfolio and it had been missing for seven months... we found it was it in our full year results...”
“Is it good quality lending, or is it rubbish? Well actually we don’t know because our data isn’t good enough… Part of the reason for the crisis is we don’t actually know what our book looks like”

14. Risk managers tried to tell their banks but no one listened
They were ignored in different ways:
Disregard system failures
Smooth out risk results
Suppress risk concerns
Ignored why?
Difficult to get risk “taken seriously outside of the risk management department”

15. Hierarchists versus individualists
Fatalist
Hierarchy
Individualist
Egalitarian

16. Eventually risk managers want to give up trying
“cog in the machine” (3.111)
a “nameless person in a suit” (5.059)
a “commodity of the bank. I’m essentially like a computer or a window or a door” (7.229).
“felt like a small unnoticed team … and almost ignored” (4.209)
“sidelined a lot of the time” (6.387).

17. Hierarchists becoming fatalists
Hierarchy
Individualist
Egalitarian

18. What can we do? Wicked problems and clumsy solutions?
The most challenging problems
Multi-dimensional and never fully solved
Clumsy solutions
Recognise the problem is demanding
Take into account the four alternative views
Not seeking perfect solution

19. Four perspectives on cyber risk
PRAGMATISTS
It is a new risk but not in all ways. Throughout time it has been the case that threats can arise and will need reacting to.
MANAGERS
Technical problem needing expertise, and requiring systems and policies.
MAXIMIZERS
Digital opportunities may be accompanied by cyber risk but the opportunities are worth pursuing .
CONSERVATORS
Zero tolerance and constant anxiety whether breaches are about to occur.
Underwood and Ingram 2010