Econ-OSFI Essay Mathematics & Economics Essay Paper

OSFI: Corporate Culture and Risk Management
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Institutional Affiliation
OSFI: Corporate Culture and Risk Management
Introduction
Organizational culture influences risk management in a corporation. This involves the behaviors of management and employees. The culture builds over an extended period. Corporate culture influences the attitudes and beliefs of individuals in the corporation. A company that has a lax culture towards risk management will take unnecessary and excessive risks in their operations. This would eventually cause a company to wind up its operations. The Office of the Superintendent of Financial Institutions (OSFI) in Canada ensures that banks operate in a sound financial system. The Independent financial regulator mandate is to provide the safe operation of financial institutions such as banks, insurance companies, and private pension plans. One goal of the regulator is to assess the quality of corporate governance in Canadian financial entities. If any weaknesses are determined, corrective measures are undertaken (Carrel, 2010). A financial institution such as a bank with a healthy corporate culture will likely have positive attitudes towards risk management and thus OSFI should enhance assessing corporate cultures to strengthen risk management practices.
Corporate culture determines the coordination in an organization. A productive culture helps improve communication between low and high-level management. This set of norms and values ensures a company’s employees and management head in the same direction. The top management has a code of conduct which it expects all employees to follow. So when employees are aware of these rules and expectations, there is a form of social control. This means wherever they are, they will behave in line with the organization’s standard code. An influential corporate culture ensures that the organization’s shared values are respected at all times. The top management must lead the way in respecting the organizational norms. One way of assessing corporate culture is evaluating the perception of employees towards top management respecting the company’s norms (Guiso, Sapienza & Zingales, 2015). This highlights the significance of management in driving corporate culture.
The board of a financial institution has the sole responsibility for fostering a strong risk culture. Culture should influence the overall decision making of employees. However, a financial institution can’t solely depend on that to promote healthy risk-taking. Employees handle a lot of the day to day activities of an enterprise. Therefore, for any risk management culture to thrive, employees must be the primary focus. A company should ensure staff has risk management expertise. Otherwise, their behaviors may cause the financial institution to be exposed to excessive risks. Employees must understand how their risk making decisions will affect the overall reputation of a company. This will help them to make safety decisions based on their obligation to the company and not a personal choice. Also, to adopt a more robust risk culture, departmental managers need to be aware of the risk appetite of the institution. This ensures that risk...