The purpose of the research is to review academic and practical knowledge and firms’ experience of culture and its role in governance and risk to inform and to improve the focus of regulators’, financial institutions’ and corporate firms’ efforts to enhance governance, risk management and performance and reduce incidence of crisis, scandal and failure.

In the wake of the global financial crisis and ensuing economic crisis as well as multiple failures and crises in corporate businesses and government agencies, many commentators have asserted that problems with organisational culture have been root causes or, at least, significantly contributory causes.  Similarly, building on earlier analyses of major failures in high-risk industries (e.g. NASA Columbia investigation), a number of official analyses of failures and crises (Enron, BP Macondo, Mid-Staffordshire NHS, among others) have found that organisational culture contributed materially to unwanted outcomes.  Yet governance codes, regulation and traditional risk management procedures have proved ineffective in dealing with the problem.

Companies and other organisations (and especially financial institutions) are facing increasing calls from regulators and supervisors to manage culture actively to reduce scandals and crises.  Yet firms have limited tools to assess their cultural health and limited understanding of how corporate behaviour and culture impact explicit and implicit risk taking or how to achieve a healthy governance and risk culture.  More worringly, some of the commentary on culture and risk in firms appears uninformed by knowledge emerging from social science – knowledge which, often, it purports to represent or deploy.

ACCA took an early lead in writing about culture in the aftermath of the financial crisis (e.g. in Risk and Reward: Tempering the pursuit of profit).  Subsequent ACCA research has identified that CFOs and our members are aware of the significance of behaviour and culture.  Our members and ACCA, as well as the public interest, would benefit from ACCA consolidating on previous work and developing further research and insights and, if feasible, guidance for organisations to increase their understanding and create a more productive and constructive culture where employees work effectively to make their organisations successful and reduce the probability of inadvertent error, crisis, failure or scandal.

ACCA surveyed its members in 2011 and the report in early 2012 identified that members see many examples of dysfunctional behaviour in their organisations, but understand the cultural norms associated with reduced dysfunction. This project will look at how organisations, and our members in them, can help to ensure more functional behaviour and reduce dysfunctional behaviour and how regulators can encourage more functional behaviour as well as the limits they face to effective regulation of culture and behaviour.