Is Your Company Culture Increasing Your Propensity for Risk?

February 26, 2024 Employment Law

Risk management is an essential function for companies of all sizes and in all industries. Effective risk management involves two key steps: (i) eliminating unnecessary risks; and, (ii) taking proactive steps to mitigate the risks that are inherent in the company’s operations.

An often-overlooked aspect of risk management is managing company culture. While companies often emphasize training, processes and providing a safe work environment—all of which are very important—they often ignore the risks associated with intangibles such as employee burnout, employee dissatisfaction and an unstable work-life balance. At the same time, a company culture that overemphasizes these intangibles can breed risk as well.

So, how can you ensure that your company culture isn’t increasing your propensity for risk? This starts with understanding the nature of the culture-related risks (if any) at hand.

The Risks of Building a Company Culture That is Too Strict

Many companies have cultures that are too strict—though they may not realize it. By implementing what may seem like sound business practices (such as strict time monitoring and in-office work requirements), companies can cause employee burnout and engender widespread employee dissatisfaction. Both of these increase the risk of mistakes on the job and have the potential to drastically reduce productivity.

The Risks of Fostering a Company Culture That is Too Lenient

Fostering a company culture that is too lenient can also increase a company’s propensity for risk. If expectations are too low, and if the repercussions for making mistakes are insufficient (or non-existent), this can lead to systemic issues that may become difficult to address. As a result, a careful balance is required. Companies must make their expectations clear, and they must take a tactful approach to encouraging employees to meet these expectations without going overboard.

How to Manage Risk Related to Your Company’s Culture

With this need for balance in mind, how can you effectively manage the risks related to your company’s culture? Here are some tips on using your company’s human resources functions as tools for effective risk management:

  • Conduct a Workplace Assessment – A thorough workplace assessment should help you answer questions such as: How well do you really understand your company’s culture? What risks is your company’s culture creating?
  • Proactively Address Issues with Your Company’s Culture – Address any culture-related issues identified during your workplace assessment proactively to ensure that they don’t continue to create unnecessary risks.
  • Look Toward the Future – Looking ahead, determine what policies and procedures your company needs to have in place to ensure that it can maintain a positive and productive company culture on an ongoing basis.

Questions? Contact AR Group to Schedule an Initial Consultation

At AR Group, we provide comprehensive human resources consulting services for companies of all sizes. If you need help evaluating your company’s culture and ensuring that its culture isn’t creating unnecessary risks, we invite you to get in touch. To get started with an initial consultation, give us a call at 720-452-3300 or contact us online today.