8DECEMBER - JANUARYOPINIONIN MYBy Gus Ortega, Senior Vice President, Head of Operational & Non-Financial Risk, Voya FinancialTHE IMPORTANCE OF RISK CULTURE IN FINANCIAL INSTITUTIONSNever has it been more pronounced than in today's business environment where organizations face a variety of risks that can significantly impact their business operations, reputation, and financial stability. These risks originate from different sources and manifest themselves in different forms, including cyber threats, financial risks, business disruptions, vendor failures, compliance, and regulatory impacts. It is, therefore, essential for organizations to establish and maintain a strong risk culture to help timely identify and mitigate risks effectively. Risk culture may have different meanings to different organizations, however, there are a set of common elements. Risk culture, by definition, is a set of values, beliefs, and behaviors that shape how an organization approaches and manages risk. It is shared understanding of the importance of risk management and a commitment to integrating risk management into everyday decision-making processes. A strong risk culture ensures that risks are identified, evaluated, and managed effectively, and that everyone in the organization understands their role in managing risk. While there are several reasons why a strong risk culture is important to an organization, the following five are critical in financial institutions:I. Risk management is part of the company's strategic objectives: A strong risk culture ensures that risk management is embedded into the fabric of the organization. This means managing risk is not just a one-time activity but rather an ongoing process that is driven by the company's leaders and is embedded into the company's objectives. II. Risk management improves decision-making: A strong risk culture helps to improve decision-making by ensuring that risk is considered at every level of the organization. When risk is embedded into the decision-making process, the organization can make more informed decisions, which take into account the potential risks and rewards associated with each option. III. Risk management increases resilience: A strong risk culture helps the organization to become more resilient in the face of adversity. By identifying potential risk and developing remediation strategies to help manage risk, organizations can better prepare Gus Ortega
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