Cultural Entropy and Risk Management

Cultural Entropy and Risk Management are intertwined. Cultural entropy is defined as the amount of energy in an organization that is consumed by unproductive work. It is also a measure of the friction and pent-up frustration occuring when potentially limiting values show-up in the workplace. It measures the level of dysfunction in an organization that is created as a result of fear-driven energy, silos mentality.

^{Image by Monica Volpin.}
As you can see all of the above poorly affects good risk management.

 In the course of our profession we spend days in conferences, meetings. We discuss important matters. Management make decisions with our support. Sometimes we learn that at the end no one acted. Other meetings follow, where discussion on past decisions are again on the table.

Cultural Entropy and Risk Management

Negative values such as bureaucracy, cognitive biases, silo mentality, blame, micro management and strict control, are stress generating factors. The stress impacts on productivity and the capacity to manage risks.

Handling Cultural Entropy and Risk Management is not easy. Indeed delegates to our courses oftentimes complain about being “someone else fault”. The usual suspect is upper management.

However, we have run exercises to precisely show delegates the major responsible is oftentimes our own brain such as the Johari window or the Cynefin framework.

The root causes of cultural entropy are the result of many years of bad practices, a layered and siloed culture representing the way of living of your company.

Changing this is certainly not easy.  It is a transformation effort which needs to come from within each of us, as we are our own leaders, before being the leaders of anyone else.

The value of information systems and risk management

Of course information systems helping us to see the correct landscape of our company are invaluable in this change effort.

Convergent, scalable, drillable, updatable risk approaches like ORE  are to be seen as eye openers in this sense.

They will help realize that inflexible and tight procedures are no good in our dynamic world. Those are bad for creativity and hinder swift but ponderate decisions.

ORE will help properly communicate risks inside and outside. It will allow management to clearly understand what risks are operational, tactical, strategic as a result of an analysis and not thanks to gut-feeling outbursts.

Tagged with: Cultural Entropy, Risk Management

Category: Risk analysis, Risk management