Making Success a Self-Plying Piano : A Study on How Management Can Influence Risk-Culture

Abstract: A common misconception is that the safest strategy when dealing with risk is to avoid it altogether, resulting in mainly risk hedging strategies aligned with a downside biased view of risk, only focusing on outcomes with a negative effect causing missed opportunities (Damodaran, 2007). Furthermore, another common misconception is the effort to quantify risk, to measure and prioritize it. However, Knight (1921) disregards such an effort due to a lack of guidance in the ever-changing business environment. For an organization to maintain its competitive advantage, it is important to create a risk culture that is neither too defensive, nor too offensive, since it can cause even worse outcomes (Damodaran, 2007). This study takes a qualitative approach, where interviews has been conducted on a single company, which is referred to as “target organization. These interviews will be representing the empirical data for the study. With surprisingly little research done on the subject of risk culture, this thesis aims to identify key managerial tools and concepts to reinforce or change their organizational risk culture. These tools were identified as communication, learning through failure, double-loop learning, incentives, and structure. Furthermore, the study has exemplified concrete measures regarding these tools to align managerial efforts to either hierarchal or adhocracy risk culture.