A new book entitled Beyond Bad Apples focuses on the role of organisations in managing their risk culture, challenging the idea that risk stems from chance circumstances or rogue behaviour.
The book, co-edited by the leaders of the Judge Business School Cambridge Centre for Risk Studies, is timely given that many companies are examining their cultures and making broad statements of reform, whether on racial issues following Black Lives Matter protests or the Me Too movement on sexual harassment.
The book shows that organisations “play a role as manufacturers and managers of risk” – thus disputing the “inside-out” perspective on risk culture that flows from the well-known expression that “one bad apple spoils the whole barrel”.
“Good risk culture can help organisations recognise their blind spots more clearly,” says the book published by Cambridge University Press, which is co-edited by Michelle Tuveson, Executive Director of the Centre for Risk Studies at University of Cambridge Judge Business School; Professor Daniel Ralph, Academic Director of the Centre; and Professor Kern Alexander of the University of Zurich, a Senior Advisor at the Centre.
“Taking the organisation as our unit of analysis is a departure from what we see hitherto as a focus on individuals, be they the proverbial ‘bad apples’, whose behaviours imply threats to an organisation as a whole, or board members who set the ‘tone at the top’ to preempt poor behaviours and encourage good behaviours.”
The book argues that risk management has become more prominent since the global financial crisis of 2008, and that the failure of businesses “put a spotlight on the role of culture in a firm versus the role of individuals” – resulting in the active management of risk culture at organisations.
“The maintenance of good corporate behaviour and responsible attitudes will lead individual employees to act with higher ethical standards and take risks that are better calibrated to the risk appetite of the firm,” says the book.
Entitled Beyond Bad Apples: Risk Culture in Business, the 286-page book makes clear that managing risk culture spans all organisations and not only companies. Completed well before the Black Lives Matter protests that followed the death in Minneapolis of George Floyd, the book’s themes fit the current discussion in many organisations about whether their cultures do enough to foster inclusion and fight racism.
The chief executive of Nike told employees in a memo earlier this month: “While we strive to help shape a better society, our most important priority is to get our own house in order. Simply put, we must continue to foster and grow a culture where diversity, inclusion and belonging is valued and is real.” Similar statements opposing racism and seeking culture change have been made by top executives at Netflix, Twitter, Citi and many other companies.
“There are some parallels in how companies have examined their cultures after the 2008 global financial crisis and events of recent weeks,” says Beyond Bad Apples co-editor Michelle Tuveson of the Cambridge Centre for Risk Studies. “While the circumstances are entirely different, in both cases there has been a broad look at organisational risk culture and whether it needs transformation, so we believe the book’s articles can provide useful insight to the current discussion.”
The book, says its conclusion, “presents opportunities to managers and policymakers to bring into alignment the profit- and efficiency-oriented objectives of firms with the social and cultural values that are necessary for a sustainable society.”
Yet it cautions that there are “no easy answers” to the problem of weak risk culture and systems in organisations or to growing strong risk cultures.
“Statements on the need for reform by companies and politicians are welcome. More interesting is whether those voices acknowledge the ambition or scale of change that they – and their constituents – are facing to realign their cultures with the goals of reform,” said book co-editor Daniel Ralph of the Centre for Risk Studies.
The book includes eight articles by authors affiliated to Cambridge Judge Business School and other institutions.
The articles include:
- “Organisational culture through the lens of organisational theory”, by Jennifer Howard-Grenville, Diageo Professor of Organisation Studies at Cambridge Judge
- “Information culture”, by Michael Power, Professor of Accounting at the London School of Economics and Political Science
- “The role of opinion leaders”, by Michelle Tuveson and Daniel Ralph of the Centre for Risk Studies at Cambridge Judge
- and “Insights from innovation”, by Stelios Kavadias, Margaret Thatcher Professor of Enterprise Studies in Innovation and Growth at Cambridge Judge, and Kostas Ladas, an associate at the Entrepreneurship Centre at Cambridge Judge.
Other articles include:
- “Culture in UK banks”, by Duncan Needham, Senior Risk Researcher at the Centre for Risk Studies, and Anthony Hotson, Deputy Director of the Centre for Financial History and a member of Darwin College, Cambridge
- “Agency relationships”, by Kern Alexander of the University of Zurich;
- “Business value” by Andrew Freeman, Risk Fellow at the Cambridge Centre for Risk Studies
- and “Ethics in risk management”, by Anette Mikes of Saïd Business School at Oxford University.