How can a chief risk officer encourage the governing body and executive management team to...

AChief Risk Officer (CRO)plays a crucial role inshaping and strengthening the risk culturewithin an organization. PRMIA defines risk culture as the shared values, beliefs, knowledge, and understanding about risk that drive behaviors within an institution.

Setting a Clear Vision

The CRO should communicate avision of risk managementthat aligns withorganizational goalswhile ensuring that risk-taking remains within acceptable limits.

The vision should beachievable and realistic, rather than overly ambitious, which could incentivize reckless risk-taking.

Embedding Risk Awareness into Decision-Making

A strong risk culture ensures that risk considerations are embedded into business decision-making rather than treated as a separate compliance exercise.

This is supported byPRMIA’s Enterprise Risk Management (ERM) Framework, which stresses integrating risk management into strategy and operations.

Avoiding a Blame Culture

A risk-aware organization promotesaccountability without fear, enabling employees to report risks without retribution.

Option B (Discourage personal accountability to avoid a blame culture) isincorrectbecause personal accountability is essential for a healthy risk culture.

Avoiding a Strict, Prescriptive Approach

Aset of rigid objectivesthat must be followed by the executive team (Option C) does not foster a dynamic, evolving risk culture.

Instead, risk culture should be flexible and adaptive to emerging risks.

Balancing Incentives and Consequences

Whilebalancing rewards with penalties(Option D) is part of governance, a strong risk culture isnotbuilt solely through fear of punishment.

PRMIA emphasizespositive reinforcement, such as linking risk management behaviors to performance evaluations and incentives.

PRMIA Risk Governance Framework– Discusses the role of leadership in shaping risk culture.

PRMIA Standards on Enterprise Risk Management (ERM)– Covers best practices for embedding risk culture within organizations.

PRMIA References for Verification