Evidencing Multiple Risk Cultures: Application of neo-Durkheimian Institutional Theory to a UK Financial Services organisation

Since the financial crisis of 2007-2008, risk culture in the Financial Services (FS) industry has been a major focus for governments, professional bodies and FS regulators, due to the excessive risk-taking that led up to the event. Whilst there is considerable pressure for FS firms to maintain a positive risk culture, there is no established accepted definition of risk culture or a method for measuring it. Furthermore, academic research into risk culture in FS firms is sparse given the relative importance of this topic.

This study turns to the work of anthropologist Mary Douglas, known as Neo-Durkheimian Institutional Theory (NDIT), to analyse risk culture. However, applications of NDIT to study organisational culture in the FS industry have been limited. This study employs mixed methods and is the largest NDIT study into risk culture in FS firms to date, taking place in a FTSE30 Insurer with 15,000 UK employees.

The FS regulators and professional bodies assume that organisations possess a single monolithic risk culture, which can be evolved through management intervention. However, the study findings reveal that, as NDIT predicts, multiple risk cultures exist in the UK Insurer. There is evidence that multiple risk cultures have practical implications for risk policy-setting, risk communication and risk decision-making. It is also argued that the Enterprise-wide Risk Management (ERM) frameworks used throughout the FS sector appeal to just one type of risk culture which might limit their effectiveness across FS firms.

By critically comparing research methodologies typically used for NDIT studies, this study argues in favour of a mixed method approach combining quantitative survey instrument with qualitative feedback. A further contribution made to NDIT theory is the refinement of key NDIT concepts as applied to analysis of risk culture, including arguing that the Douglasian concepts of classification and ritual are central to risk management activities.