EPM5740 - Analyzing Risk Culture and Attitude in Project Management

This report explores the intricate relationship between risk culture and risk attitudes within the context of project risk management. It highlights how these factors influence organizational decision-making and the importance of fostering a proactive risk culture. The report delves into the elements of a good risk culture, including organizational tone, internal and external drivers, and the impact of subcultures. It emphasizes the need for organizations to understand and manage risk effectively to improve efficiencies, enable better decision-making, and minimize potential legal issues. The study uses a literature review approach and references various sources to support its findings and recommendations. Desklib offers a range of resources, including solved assignments and past papers, for students studying similar topics.

Risk Culture and Risk Attitude 1
Risk Culture and Risk Attitude
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Executive Summary
This report involves the topic project risk management by clearly addressing how risk culture
and risk attitudes influence each other and contributes to assist organizations in making better
and informed decisions. Furthermore, the report keenly addresses the need to create a proactive
risk culture as well as elaborating best practices involved in structuring a risk culture to
proactively mitigate risks in an organization.

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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................3
How risk attitudes influence risk culture.........................................................................................4
Need to build a good risk culture.....................................................................................................5
Elements of a good risk culture.......................................................................................................7
Organizational tone......................................................................................................................7
Factors driving risk culture..........................................................................................................7
Internal factors.............................................................................................................................8
External factors influencing risk culture......................................................................................8
Subcultures that influence risk culture........................................................................................8
Link to culture..............................................................................................................................8
Conclusion.......................................................................................................................................9

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Introduction
Risk related to the personal circumstances, society and business. Risk can be explained
from two widely known characteristics such as uncertainty and consequences. However, risk
should not be considered to be the same as uncertainty. The difference between the two stems
from understanding their consequences. Hence risk can be termed as uncertainty that is
meaningful. This is because uncertainty without consequences does not present risk. In this
regard, it presents challenge to define risk without considering particular objectives (Vasvári
2015). The more appropriate meaning of risk refers to uncertainty that could have consequences
on other objectives.
This implies that risk arises as a result of uncertainties that may influence the objectives
of time, cost and scope. Differentiating objectives and risks that plays a crucial role in the
process of mitigating risk because it necessitates identification of risk, significance and
evaluating appropriate responses. More importantly, these aspects are crucial in drawing insight
on risk behavior which are often as a result of individuals, groups and the degree to which the
risk matter. Attitude on the other hand is a term that refers to inner dealings of the brain where
behavior is considered to be the state of mind with respect to some fact. In this regard, attitudes
that are used in human mental process and positioning refers to selected responses.
How risk attitudes influence risk culture
Attitudes could be in different nature since there are some that are deeply rooted
representing the strong values of an organization. Other form of attitude tend to be malleable and
differ from personal characteristics. This implies that if these factors can be understood, then
influencing them becomes a possibility (Hillson 2017). Consequently, allowing groups and
individuals to manage their attitudes. This characteristic feature of attitude that makes it suitable

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for modification is significant in understanding rusk attitudes. It is important to consider that if
attitudes were inherently fixed at birth, then there would be no possibility of managing them.
Since risk is termed as an uncertainty with direct and indirect consequences on objectives
and behavior, it is considered as a the preferred state of the brain, then risk behavior can be
termed as preferred natural state of concerning uncertainties that could have consequences on the
objectives. Furthermore, it is alluded that a range possible forms of attitude could be adopted
towards similar situation which is reflected in difference in behavior. Here, behavior can be
considered as a diagnostic indicator for attitude which informs extensive research on behavioral
psychology and management practices.
Although attitude is expressed as a result of behavior, there are other factors that
influence the chosen or preferred attitude (Fraser and Simkins 2016). The degree to which this
scenario is likely relies on the perception of the situation that a particular attitude is responding
to. Even though the responses attributed to positive and negative situation indicate that
environment is a major determinant of behavior, it relates to how each individual perceives the
environment. The factor that influences behavior when the situation is uncertain is risk attitude
which reflects the chosen response to the view of positive uncertainty with respect to the
situation.
Need to build a good risk culture
A vibrant risk culture is crucial for an organization because it assists in managing
strategic objectives of an institution. Thus the need for risk culture is required to address various
challenges involving operational and financial risk. Normally, the corporate world does poorly in
decision making with respect to formulating concrete strategies. According to a survey that was

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conducted by Mckinsey. 6.5 percent of organizations have effective measures to formulate
strategies. Furthermore, a substantive group indicates that decision makers are more risk averse
and consider emerging opportunities to be riskier. Another research indicates that only 41
percent of organizations have implemented risk management with their functions to assist in
implementing cooperate strategy (Hillson 2013).
In most cases, majority of leaders in organizations do not have the right information and
people within the organizations are unwilling to mention the risks involved. Lack of information
and communication on risk within an organization presents the necessity to have a strong risk
process. Uncertainties can be measured by the extent to which employees of the organization
understand business decisions give rise to various risks that require to be mitigated. A report
compiled by KPMG on risk culture suggested that 58 percent of corporate leaders indicate that
their company’s employees that lacked training on the procedures of assessing risk.
Besides, a majority alluded that their organizations lacked formal risk management. This
implies that employees do not tend to view risk consciously while making decisions (Culture
2012). Considering operational decision when employees do not weigh risk, the decision can be
catastrophic at a later time. Therefore, there is need for risk culture when employees have the
perception of doing things rather than doing the right thing. Furthermore, risk culture is required
because management tend to reward the employees for obedience and not feedback or
suggestions thus ending up hiding significant information from their bosses.
The employees clean information going upwards in order to maintain the state of political
correctness. This leads to biased information reaching the decision makers hence leading to poor
decision making. A different type of risk manifest when many people can influence the channel
of communication. For instance, a message is likely to be distorted when being channeled

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through word of mouth and among several messengers. As a result, risk culture will ensure that
such risks are identified proactively and ensure systems of channeling information are structured.
Nonetheless, some risk are difficult to understand without a good risk culture.
Developing a risk culture should be important in an organization because lack of an elaborate
one will influence an organization negatively. In essence, a healthier risk culture is one that
leadership is influenced to offer clear directions concerning the objectives and goals to me so
that the team is able to understand what is expected of them and the challenges that are likely to
arise. Having clear information contributes to comprehending what could go wrong, motivates
people to do the right thing and assists to reward ethical decision and punish employees who
make unethical risk decisions.
Elements of a good risk culture
Risk culture may present challenges in the quest to improve performance of risk
management. Risk culture is characterized to evolve as the organization evolves. In this regard, it
is important for organizations to make self-assessment framework for understanding how a good
cooperate culture should be.
Organizational tone
The tone of organizations considers all levels of communication with respect to
management of risk, regulations and corporate social responsibility. Communication arising from
leaders of the organization to employees is meaningless if the employees listen and report to
their immediate manager. The higher the number of supervising officers in an institution, the
higher the risks associated with information flow. Similarly, it also presents to management with
respect to risk associated to various departments in an organization. A good risk culture will

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ensure that information is not distorted while going up to the leaders or moving down to the
employees (Bakker and Somani 2006).
Factors driving risk culture
Various aspects influence risk culture through tone such as risk governance framework,
mission statement, ethical practices, oversight activities and the assessment of risk processes.
Other drivers of risk culture include risk appetite engagement of executives, management of
factors contributing to risk and reducing the frameworks of executing an organization strategy.
Internal factors
Internal factors comprises behavior, beliefs and values that influence character and
informs normal activities. For instance, the relationship between management of risk and
monitoring accountability often manifests through processes to manage audit issues, resolve
inefficiencies in control and address conflicts.
External factors influencing risk culture
These factors that play a critical role in influencing risk include regulatory framework,
expectation of customers among other stakeholders. The degree an organization endeavors to
satisfy requirements and expectation is reflected in the alignment of the business process in a
manner that can be improved with respect to resilience.
Subcultures that influence risk culture
Various subculture allow an organization to be proactive in addressing issues as a result
of changing business environment (Barrett and Baret 2013). Furthermore, it also allows sharing
of knowledge with parties that may have not accessed a particular information. In contrast, these

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sub cultures may lead to poor risks taking behavior that may endanger the missions and visions
of an institution.
Link to culture
Risk Culture is not considered to be operating in a vacuum in relation to overall activities
or operations of a business contributes in increasing risks for a particular organization. As a
result, a good risk culture that an organization can adopt is one that is able to proactively
understand each operations of the business, how they are linked and potential risk that they are
likely to encounter.
Conclusion
In conclusion, there is significance in having an effective risk culture will be able to
ensure that risks are reduced prior in order to increase efficiencies and enable the leadership to
make better decision for sustainability concerning the business. As well, a good risk culture is
important for ensuring that organizations run smoothly and minimize legal battles.

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Reference List
Bakker, K.D. and Somani, S., 2006. Establishing Cultural Influences on Risk Management.
In 2006 PMI Global Congress Proceedings.
Barrett, E. and Baret, S., 2013. Cultivating a Risk Intelligent Culture. Understand, Measure, and
Strengthen. Deloitte, Hamilton.
Culture, R., 2012. Under the Microscope Guidance for Boards. Institute of risk management.
Fraser, J.R. and Simkins, B.J., 2016. The challenges of and solutions for implementing enterprise
risk management. Business horizons, 59(6), pp.689-698.
Hillson, D., 2013. The ABC of Risk Culture: How to be Risk-mature. Project Management
Institute.
Hillson, D., 2017. Managing risk in projects. Routledge.
Vasvári, T., 2015. Risk, risk perception, risk management–a review of the literature. Public
Finance Quarterly, 60(1), pp.29-48.