IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v148y2023ics0378426622003004.html
   My bibliography  Save this article

Measuring risk culture in finance: Development of a comprehensive measure

Author

Listed:
  • Ghafoori, Eraj
  • Mata, Fernanda
  • Lauren, Nita
  • Faulkner, Nick
  • Tear, Morgan J.

Abstract

Understanding and measuring risk culture informs the development of interventions to improve risk culture in organizational settings. Study 1 used a rapid review to determine the need for a comprehensive and psychometrically robust risk culture scale. Identifying such a need, Study 2 aimed to develop a psychometrically robust risk culture scale. Although two scales measuring risk culture were identified in Study 1, none of these scales: (1) fully incorporated the existing conceptual frameworks identified by the review; and (2) demonstrated construct validity and reliability. This indicated there was scope for developing a new measure. Study 2 found evidence for seven unique factors (Management commitment to risk, Psychological safety, Incentives, Risk Capability and Training, Risk communication, Risk Strategy, and Risk support) of risk culture using samples of employees at a major financial firm. The scale presented in this study offers a comprehensive instrument to measure risk culture in organizational settings.

Suggested Citation

  • Ghafoori, Eraj & Mata, Fernanda & Lauren, Nita & Faulkner, Nick & Tear, Morgan J., 2023. "Measuring risk culture in finance: Development of a comprehensive measure," Journal of Banking & Finance, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:jbfina:v:148:y:2023:i:c:s0378426622003004
    DOI: 10.1016/j.jbankfin.2022.106720
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378426622003004
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbankfin.2022.106720?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fritz-Morgenthal, Sebastian & Hellmuth, Julia & Packham, Natalie, 2016. "Does risk culture matter? The relationship between risk culture indicators and stress test results," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 9(1), pages 71-84, January.
    2. ., 2021. "Partner selection and assessing credibility," Chapters, in: Networks, SMEs, and the University, chapter 7, pages 88-108, Edward Elgar Publishing.
    3. Tom W. Reader & Mark C. Noort & Steven Shorrock & Barry Kirwan, 2015. "Safety sans frontières: an international safety culture model," LSE Research Online Documents on Economics 60065, London School of Economics and Political Science, LSE Library.
    4. Rüdiger Fahlenbrach & Robert Prilmeier & René M. Stulz, 2012. "This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance during the Recent Financial Crisis," Journal of Finance, American Finance Association, vol. 67(6), pages 2139-2185, December.
    5. Richard S. J. Tol, 2021. "Europe’s Climate Target for 2050: An Assessment," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(6), pages 330-335, November.
    6. Ruchi Agarwal & Sanjay Kallapur, 2018. "Cognitive risk culture and advanced roles of actors in risk governance: a case study," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 19(4), pages 327-342, August.
    7. Beatriz Fernández Muñiz & José Manuel Montes Peón & Camilo José Vázquez Ordás, 2020. "Misconduct and Risk Climate in Banking: Development of a Multidimensional Measurement Scale," Global Policy, London School of Economics and Political Science, vol. 11(S1), pages 73-83, January.
    8. World Bank & Global Facility for Disaster Reduction and Recovery, 2021. "Emergency Preparedness and Response Assessment," World Bank Publications - Reports 35583, The World Bank Group.
    9. Vikash Kumar Sinha & Marika Arena, 2020. "Manifold Conceptions of the Internal Auditing of Risk Culture in the Financial Sector," Journal of Business Ethics, Springer, vol. 162(1), pages 81-102, February.
    10. Isaías Gomes & Rui Melicio & Victor M. F. Mendes, 2021. "Assessing the Value of Demand Response in Microgrids," Sustainability, MDPI, vol. 13(11), pages 1-16, May.
    11. George G. Gordon & Nancy DiTomaso, 1992. "Predicting Corporate Performance From Organizational Culture," Journal of Management Studies, Wiley Blackwell, vol. 29(6), pages 783-798, November.
    12. Bryce, Cormac & Webb, Rob & Cheevers, Carly & Ring, P. & Clark, G., 2016. "Should the insurance industry be banking on risk escalation for solvency II?," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 131-139.
    13. Alessandro Carretta & Vincenzo Farina & Paola Schwizer, 2017. "Risk culture and banking supervision," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 25(2), pages 209-226, May.
    14. Agarwal, Arvind & Gupta, Aparna & Kumar, Arun & Tamilselvam, Srikanth G., 2019. "Learning risk culture of banks using news analytics," European Journal of Operational Research, Elsevier, vol. 277(2), pages 770-783.
    15. Pipas Maria Daniela, 2013. "The Interdependence Between Management, Communication, Organizational Behavior And Performance," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1554-1562, July.
    16. Terje Aven & Ortwin Renn, 2009. "On risk defined as an event where the outcome is uncertain," Journal of Risk Research, Taylor & Francis Journals, vol. 12(1), pages 1-11, January.
    17. Reader, Tom W. & Gillespie, Alex & Hald, Julie & Patterson, Megan, 2020. "Unobtrusive indicators of culture for organizations: a systematic review," LSE Research Online Documents on Economics 104482, London School of Economics and Political Science, LSE Library.
    18. Angela Zeier Roeschmann, 2014. "Risk Culture: What It Is and How It Affects an Insurer's Risk Management," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 17(2), pages 277-296, September.
    19. Tom W. Reader & Mark C. Noort & Steven Shorrock & Barry Kirwan, 2015. "Safety sans Frontières: An International Safety Culture Model," Risk Analysis, John Wiley & Sons, vol. 35(5), pages 770-789, May.
    20. Patrick John Ring & Cormac Bryce & Ricky McKinney & Rob Webb, 2016. "Taking notice of risk culture -- the regulator’s approach," Journal of Risk Research, Taylor & Francis Journals, vol. 19(3), pages 364-387, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bernhard Streicher & Moritz Bielefeld & Eric Eller, 2023. "The Risk Culture Framework: Introducing an Integrative Framework for Holistic Risk Analysis," SAGE Open, , vol. 13(3), pages 21582440231, August.
    2. Meghan P. Leaver & Tom W. Reader, 2019. "Safety Culture in Financial Trading: An Analysis of Trading Misconduct Investigations," Journal of Business Ethics, Springer, vol. 154(2), pages 461-481, January.
    3. Matthias Thiemann, 2021. "La relation asymétrique des banques centrales au financement de marché : une évaluation des implications pour la stabilité financière à la lumière des évènements lés à la Covid," Post-Print hal-03622943, HAL.
    4. Beatriz Fernández-Muñiz & José Manuel Montes-Peón & Camilo José Vázquez-Ordás, 2022. "The influence of organizational climate, incentives and knowledge sharing on misconduct and risk-taking in banking," Risk Management, Palgrave Macmillan, vol. 24(1), pages 55-80, March.
    5. Perčić, Maja & Vladimir, Nikola & Jovanović, Ivana & Koričan, Marija, 2022. "Application of fuel cells with zero-carbon fuels in short-sea shipping," Applied Energy, Elsevier, vol. 309(C).
    6. Matthias Thiemann, 2021. "La relation asymétrique des banques centrales au financement de marché : une évaluation des implications pour la stabilité financière à la lumière des évènements lés à la Covid," SciencePo Working papers Main hal-03622943, HAL.
    7. Reader, Tom W. & Gillespie, Alex, 2023. "Developing a battery of measures for unobtrusive indicators of organisational culture: a research note," LSE Research Online Documents on Economics 115776, London School of Economics and Political Science, LSE Library.
    8. Eling, Martin & Jia, Ruo, 2018. "Business failure, efficiency, and volatility: Evidence from the European insurance industry," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 58-76.
    9. E. Julie Hald & Alex Gillespie & Tom W. Reader, 2021. "Causal and Corrective Organisational Culture: A Systematic Review of Case Studies of Institutional Failure," Journal of Business Ethics, Springer, vol. 174(2), pages 457-483, November.
    10. Folke, Filippa & Melin, Marika, 2022. "Selecting flight mode – Risk factors associated with presenteeism among commercial pilots and the role of depressive symptoms," Journal of Air Transport Management, Elsevier, vol. 103(C).
    11. Noort, Mark C. & Reader, Tom W. & Gillespie, Alex, 2019. "Speaking up to prevent harm: a systematic review of the safety voice literature," LSE Research Online Documents on Economics 100774, London School of Economics and Political Science, LSE Library.
    12. Pereira, Vijay & Bamel, Umesh & Paul, Happy & Varma, Arup, 2022. "Personality and safety behavior: An analysis of worldwide research on road and traffic safety leading to organizational and policy implications," Journal of Business Research, Elsevier, vol. 151(C), pages 185-196.
    13. Johan Graafland, 2020. "When Does Economic Freedom Promote Well Being? On the Moderating Role of Long-Term Orientation," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(1), pages 127-153, May.
    14. Hafiz Zahoor & Albert P. C. Chan & Wahyudi P. Utama & Ran Gao & Irfan Zafar, 2017. "Modeling the Relationship between Safety Climate and Safety Performance in a Developing Construction Industry: A Cross-Cultural Validation Study," IJERPH, MDPI, vol. 14(4), pages 1-19, March.
    15. Vikash Kumar Sinha & Marika Arena, 2020. "Manifold Conceptions of the Internal Auditing of Risk Culture in the Financial Sector," Journal of Business Ethics, Springer, vol. 162(1), pages 81-102, February.
    16. Jennifer Kunz & Mathias Heitz, 2021. "Banks’ risk culture and management control systems: A systematic literature review," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 32(4), pages 439-493, December.
    17. Hald, Julie & Gillespie, Alex & Reader, Tom W., 2021. "Causal and corrective organisational culture: a systematic review of case studies of institutional failure," LSE Research Online Documents on Economics 106537, London School of Economics and Political Science, LSE Library.
    18. Sabina Krsnik & Karmen Erjavec, 2023. "Influence of Sociodemographic, Organizational, and Social Factors on Turnover Consideration Among Eldercare Workers: A Quantitative Survey," IJERPH, MDPI, vol. 20(16), pages 1-15, August.
    19. Kurz, Michael & Kleimeier, Stefanie, 2019. "Credit Supply: Are there negative spillovers from banks’ proprietary trading? (RM/19/005-revised-)," Research Memorandum 026, Maastricht University, Graduate School of Business and Economics (GSBE).
    20. Smith, Julia A. & England, Claire, 2019. "An ethnographic study of culture and performance in the UK lingerie industry," The British Accounting Review, Elsevier, vol. 51(3), pages 241-258.

    More about this item

    Keywords

    Risk culture; Organizational culture; Finance; Rapid review; Scale development;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:148:y:2023:i:c:s0378426622003004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.