Part 1 - Culture Risk: The 10 Governance Priority for Boards and Executives
Part 1 in the Culture Risk Intelligence Series for Boards and Executives
"National cultures are part of the mental software we acquired during our first ten years of our lives and they contain our most basic values. Organisational cultures are acquired when we enter a workforce, with our values firmly in place, and they consist mainly of the organization's practices - they are more superficial." - Geert Hofstede
Across Boardrooms and Executive teams, it’s become increasingly clear that culture can no longer be a peripheral concern - it is a material risk and a lever for performance.
In recent years, cultural factors have been cited as root causes in a range of high-impact organisational failures: conduct issues, failed transformations, reputational damage, missed M&A synergies and workforce disengagement. Despite this, many organisations still lack the tools, language, and frameworks to assess cultural risk in a structured way.
At The Culture Factor, we call this capability Culture Risk Intelligence - the ability to detect, understand, and respond to cultural risks before they compromise value, performance, or trust.
We’ve identified ten common types of culture risk that Boards and Executives should be actively monitoring. These are not theoretical categories, they are practical risk areas, often visible in hindsight but overlooked in real time.
This post introduces each of the ten risks, along with questions designed to help Boards and Executives consider whether these risks may be present in their organisation.
Before we start, it’s important to distinguish culture risk from risk culture. This series addresses culture as a source of enterprise risk exposure, distinct from risk culture, which refers to how risk is understood, discussed and managed across the organisation. I’ll be exploring that topic in a dedicated post in the coming weeks.
1. Governance & leadership accountability risk
When Boards and Executives fail to set, model, or oversee the desired culture - leading to misalignment and exposure.
- Has the desired culture been clearly defined and aligned with strategy and embedded into leadership expectations?
- Are senior leaders modelling the behaviours needed to reinforce the cultural intent?
- Are there clear accountability mechanisms for culture at both governance and operational levels?
2. Insight deficit risk
When Boards and Executives lack visibility into cultural realities - relying on sentiment, lag indicators, perception or assumptions.
- Are we drawing on reliable, multi-source data to assess culture across geographies, business units and levels?
- Can we detect early signs of misalignment before they impact outcomes?
- Are cultural insights regularly reported alongside risk, transformation, and performance data?
3. Regulatory & compliance risk
When cultural norms and behaviours contribute to breaches of ethical, legal, or regulatory expectations.
- Does our culture reinforce ethical decision-making, not just policy compliance?
- Do employees feel safe and supported in speaking up about concerns?
- Are cultural enablers and inhibitors of compliance actively monitored?
4. Strategic execution & transformation risk
When culture resists change, slows transformation, or undermines M&A integration or strategic shifts.
- Is our culture and our subcultures across the organisation, aligned to support our future-state strategy and transformation agenda?
- Are cultural dynamics considered in strategic planning and implementation decisions?
- Is the behaviour of company Executives aligned with the culture required to enable the strategy?
5. Innovation & adaptability risk
When a rigid, siloed, or risk-averse culture limits the ability to innovate, adapt, and learn.
- Does our culture support experimentation, learning from failure, and safe-to-fail testing?
- Are silos, different geographies, hierarchies, or leadership norms inhibiting collaboration or agility?
- Are we evolving fast enough to meet emerging market demands and opportunities?
6. Reputation & stakeholder trust risk
When the lived culture fails to meet stakeholder expectations - undermining trust, credibility, and licence to operate.
- Is there alignment between our internal behaviours and the values we communicate externally?
- Are we regularly listening to and learning from stakeholder expectations around trust and culture?
- Would elements of our culture withstand public scrutiny without reputational harm?
7. Workforce & organisational effectiveness risk
When culture impairs performance, engagement, collaboration, or psychological safety.
- Does the culture enable clear decision-making, accountability, and shared performance outcomes?
- Is the organisation’s culture - designed for the work that needs to be done and aligned with the environment in which it operates?
- Is psychological safety consistently present across functions, teams, and leadership layers?
8. Decision-making & cognitive bias risk
When culture reinforces legacy thinking, power dynamics, groupthink and creates blind spots.
- Are there processes in place that are designed to improve the quality of decision making across the organisation?
- Are cultural norms unintentionally suppressing dissent or reinforcing dominant voices?
- Do we regularly assess decisions for bias, blind spots, and untested assumptions?
9. Psychological safety risk
When people don’t feel safe to speak up, challenge ideas, or raise concerns leaving risks and opportunities undisclosed.
- Is there sufficient trust and accountability within the organisation?
- Is the organisational culture aligned to the work that needs to be performed?
- Are breaches of inclusion, respect, or trust addressed visibly and consistently?
10. Talent management risk
When culture fails to attract, develop, or retain high-performing talent particularly in competitive or shifting sectors where the competition for rare talent is high.
- Is our internal culture consistent with the experience we promise to potential and current talent?
- Are we listening to why people stay, thrive — or choose to leave?
- Does our environment support the growth, inclusion, and contribution of diverse talent?
These ten risks represent a new language of oversight - one that treats culture not as an HR domain, but as an enterprise strategic and governance issue.
Conclusion
Our national culture - our somewhat “fixed” personal programming - represents the deeply seated values that shape how we think - It’s the lens through which we each view the world and solve problems. Organisational culture, in contrast, comprises the shared attitudes, practices, and behaviours adopted in the workplace. Unlike national culture, it’s a form of “mental software” that varies by organisation and can be intentionally changed to support strategic goals.
And like any system, that software can be inefficient, inconsistent or carry unseen bugs - unexamined assumptions that quietly influence judgment, trust, and execution.
Boards and Executive teams don’t need to rewrite the entire code. But they do need to know where the problems lie.
As you reflect on these 10 culture risks, consider:
- What organisational practices might be enabling underperformance, blind spots, or erosion of trust without being identified?
- Is culture reflected in your leadership dashboards, or is it still a missing dimension of risk and strategy governance?
- And if culture shapes behaviour through unwritten rules, how regularly are you reviewing which rules are actually being followed?
If you're interested in strengthening your organisation’s Culture Risk Intelligence capability feel free to connect or message me here on LinkedIn.
Regards,
The Culture Factor Australasia
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