Leadership and Risk Culture

There is arguably no more important role for senior leaders than to prepare organizations for risk. Firms face different types of risk, including strategic, operational, market, liquidity, credit, and reputational. This article starts by exploring risk leadership at TD Bank Group and Maple Leaf Foods Inc. In 2002, TD Bank’s leadership lowered its risk tolerance following years of volatile and uneven performance. It avoided excessive risk (including sub-prime lending) and grew from the 55th-largest North American bank in terms of market capitalization to the sixth in 2012. Maple Leaf Foods Inc., a large food-processing company, underwent a crisis in 2008 when its processed meats were implicated in 23 deaths due to Listeriosis. The firm then developed a world-leading food-safety culture, mobilized an increased industry focus on food safety, and recovered financially.

Five activities that lead to the establishment and maintenance of a strategically driven culture are described. “Think it” stresses the need for a deliberately conceived culture, rather than one that is merely emergent. “Talk it” emphasizes the need for messages and expectations to be articulated forcefully and clearly. “Walk it” suggests that leaders must not deviate from messages about a desired culture, and should offer organizational rewards for culturally congruent behaviours. “Reinforce it” states that leaders should celebrate the success of their organizational culture, while exercising caution. “Check it” suggests that leaders must link their current culture with their desired future culture and prevent the emergence of unplanned, undesired manifestations of culture.