SVETLOZAR KARANESHEV RISK GOVERNANCE & CULTURE SVETLOZAR KARANESHEV & STELIANA KEMCHEVA

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1 RISK GOVERNANCE & CULTURE & STELIANA KEMCHEVA 1

2 Corporate Governance, Risk and Risk Culture, Information and Data Governance, Big Data, Data Analytics and Business Intelligence. Experience: 25 years in the area of risk and finance. As a Head of Audit he assesses the risks of the organization, audits the corporate and risk governance; strategic, control and operational management systems and function; critical business and operational processes and functions. His achievements before are in the areas of risk management; mergers, acquisitions and post-merger integration; business development; organization development, restructuring and turnaround; investment portfolio management; design and implementation of management and control systems; business process design and reengineering. Co-Founder of the Risk Culture Lab aimed to connect experts to build knowledge on the role of Culture and Risk Culture in organizations and society and to experiment and explore Culture and Risk Culture in the context of today's reality svetlozar.karaneshev@gmail.com

3 STELIANA KEMCHEVA Culture & Team Dynamics Consultant at Eudaimonia Solutions Co-founder of Risk Culture Lab I am passionate about designing and hosting participatory group processes which ignite team s capacity to co-create and communicate while capitalizing on the different personalities people have. My approach follows the dance between structure and chaos, planned and emerging, knowing and sensing, intellect and emotions in a dynamic ever-changing environment. I believe that collaboration and having a shared vision are key factors for building strong organizational culture which inspires and provokes commitment. steliana@eudaimonia.solutions

4 THE ORGANIZATION IS...?

5 THE CONTROL SYSTEM IS...

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7 COBIT 5 FOCUSES ON RISK CULTURE

8 PRINCIPLE 4: ENABLING A HOLISTIC APPROACH

9 PRINCIPLE 4: ENABLING A HOLISTIC APPROACH

10 PRINCIPLE 5: SEPARATING GOVERNANCE FROM MANAGEMENT

11 PRINCIPLE 5: SEPARATING GOVERNANCE FROM MANAGEMENT

12 RISK GOVERNANCE As part of the overall corporate governance framework, the framework through which the board and management establish and make decisions about the bank s strategy and risk approach; articulate and monitor adherence to risk appetite and risk limits vis-à-vis the bank s strategy; and identify, measure, manage and control Risks. Risk culture is important element of risk governance. (BCBS corporate governance principles for banks, July 2015)

13 WHY IS RISK CULTURE SO IMPORTANT? All organisations need to take risks to achieve their objectives. The prevailing risk culture within an organisation can make it significantly better or worse at managing these risks. Risk culture significantly affects the capability to take strategic risk decisions and deliver on performance promises. Risk culture Under the Microscope Guidance for Boards ulture_a5_web15_oct_2012.pdf

14 WHAT IS RISK CULTURE? Risk Culture are the values, beliefs, knowledge, attitudes, level of awareness, and the perceptions of risk shared by a group of people with a common goal. It determines their collective ability to identify, discuss and react to the organization's current and future risks.

15 GUIDANCE ON SUPERVISORY INTERACTION WITH FINANCIAL INSTITUTIONS ON RISK CULTURE TONE FROM THE TOP: The board and senior management are the starting point for setting the financial institution s core values and expectations for the risk culture of the institution, and their behaviour must reflect the values being espoused. ACCOUNTABILITY: Relevant employees at all levels understand the core values of the institution and its approach to risk, are capable of performing their prescribed roles, and are aware that they are held accountable for their actions in relation to the institution srisk-taking behaviour. Staff acceptance of risk-related goals and related values is essential. EFFECTIVE COMMUNICATION & CHALLENGE: A sound risk culture promotes an environment of open communication and effective challenge in which decision-making processes encourage a range of views; allow for testing of current practices; stimulate a positive, critical attitude among employees; and promote an environment of open and constructive engagement. INCENTIVES: Performance and talent management encourage and reinforce maintenance of the financial institution s desired risk management behaviour. Financial and nonfinancial incentives support the core values and risk culture at all levels of the institution.

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17 RISK CULTURE MODELS All models are wrong but some are useful. GEORGE BOX

18 RISK CULTURE MODELS

19 IS CULTURE REALLY THAT IMPORTANT? Culture eats strategy for breakfast, technology for lunch and everything else for dinner. Bill Aulent, MIT Sloan School of Management.

20 IS CULTURE REALLY IMPORTANT TODAY COMPARED TO ALL WE NEED TO THINK OF? Modern humans have radically changed the way that they work and the way that they live. Companies need to change the way they manage and lead to match the way that modern humans actually work and live. Brian Halligan, CEO, Hubspot

21 DOESN T CULTURE HAPPEN ON ITS OWN? All great organization have a great culture and that happens neither by chance, nor overnight. For that to happen, culture needs to be MEASURED to be observable and then MANAGED. Natalia Blagoeva, Founder & Director of Eudaimonia Solutions (Zurich Sofia) and Co-Founder of Unleash Leadership (London Berlin Zurich)

22 THE WHOLE-SYSTEM CULTURE NAVIGATOR WHAT IS IT? A whole-system approach to measuring the culture of an organization so that all its elements are visible and can then be understood and managed over the short, medium and long-term. W E G E T T O T H E C O R E

23 THE WHOLE-SYSTEM CULTURE NAVIGATOR It helps you identify WHAT WORKS and WHAT DOESN T in your current organizational culture and most importantly WHAT CAN BE DONE to make it work best, boost performance and engagement and support your strategy. The tool builds upon and uses at its core the state-of-the-art methodology of the Barrett Values Centre and its flagship methodologies provoking and fostering Leadership Development and Culture Transformation. In addition, it incorporates our own experience as well as other leading methodologies of our times. W E G E T T O T H E C O R E

24 WHY A WHOLE-SYSTEM APPROACH? Recognizes the need for actions in all four dimensions at the same time. INDIVIDUAL LEVEL OF COMPETENCE BEHAVIORS PERFORMANCE COLLECTIVE STRUCTURES & SYSTEMS PRODUCT, EQUIPMENT, ETC. BOTTOM LINE RESULTS LEADERSHIP CO-WORKERSHIP PERSONAL MATURITY SHARED VALUES LIMITING BELIEFS SHARED STRATEGIC VISION Source: K. Wilber

25 WHY A WHOLE-SYSTEM APPROACH? Culture is not about putting make up and playing roles. To make it really work for you, you need to get to the core: (1) PEOPLE HAVE PHYSICAL, EMOTIONAL, MENTAL, SPIRITUAL NEEDS, which impact how they perform, collaborate and contribute. (2) ORGANIZATIONS ARE LIVING SYSTEMS- complex and unpredictable, but also able to survive, adapt, evolve and thrive. (3) THERE ARE SYMPTOMS AND PATTERNS that navigate to what works and what doesn t and how to make things better. W E G E T T O T H E C O R E

26 WSCN SCOPE (1 of 4) PHYSICAL CONDITIONS Workplace Quality Physical Renewal Healthy Balance FINANCIAL STABILITY Finance Savvy Balance of Short and Long-Term Focus RELATIONSHIPS Emotional Maturity Quality of Relationships Reasons for Cultural Entropy COMMUNICATION Communication Quality of Questions & Listening

27 WSCN SCOPE (2 of 4) STRUCTURE & MANAGEMENT Roles, Structure, Symbols Profit, Growth Manag. Style Stakeholders Focus MEASUREMENT & AWARDS Type of KPIs Formal & informal awards, benefits & recognitions. ORGANIZATIONAL LEARNING EQ SQ, Int.Q, CQ, Coll.Q, Blinds Spots, Mental Models, Self-Mastery, Systems Thinking INNOVATION & DIVERSITY Diversity, Creativity &, Innovation, Tolerance for Mistakes, Bottom- Up &Top-Down Initiatives

28 WSCN SCOPE (3 of 4) DECISION- MAKING Capacity Fearbased vs. Opportunity-based Seniority and Rules vs. Rightness AUTHENTICITY & WHOLENESS Unique Authentic Integrated Cohesive Culture vs. Strategy FULL-SPECTRUM LEADERSHIP Self-Leadership & Personal Entropy, Full-spectrum Leadership OPENNESS TO OPPORTUNITIES Mistrust vs. Trust Scarcity vs. Abundance Self vs. Others Blame vs. Systems view Stress vs. Balance

29 WSCN SCOPE (4 of 4) SUSTAINABILITY & SOCIAL RESP. Adequacy Making a Difference & Social Impact Resilience Stakeholders MISSION, VISION INTEGRATION Formulation, Updating, Level of their Integration FULL-SPECTRUM ORGANIZATION CVA, Value spread, Cultural Entropy and related KPIs

30 CULTURE REQUIRES LIFE-LONG FOCUS

31 WSCN PROCESS INTERVIEWS WSCN ASSESSMENT DESIGN OF THE TRANSFORM. PROGRAM DESKTOP REVIEWS, RESEARCH & SETUP WORKSHOP ADDITIONAL INTERVIEWS ANALYSIS AND REPORT WORKSHOPS COACHING OF TRANSFORM. CHAMPIONS SETTING PURPOSE, STRATEGIC GOALS, ASSESSING RISKS ASSESSMENT DEFINITION OF A TRANSFORM. PROGRAM & COACHING W E G E T T O T H E C O R E

32 STRATEGY-FIT PERFORMANCE SUSTAINABLE RESULTS CONSCIOUS CHOICE OF DIRECTION ENGAGEMENT FUTURE-FIT WSCN ADVANTAGES W E G E T T O T H E C O R E

33 IS IT TOO EARLY OR TOO LATE TO TALK ABOUT RISK CULTURE? SOFIA WELCOME

34 SVETOSLAV THANK YOU! We would love to hear from you! KARANESHEV STELIANA KEMCHEVA