Retail banking risk culture: a comparison of South African and Kenyan operations

Abstract

The 2008 global financial crisis prompted renewed interest by prudential regulators, consultants and academic researchers in organisational behaviour including attitudes of global financial institutions to risk-taking. However, the evidence from the existing literature suggests that risk culture studies on African financial institutions and risk culture studies on organisations operating in multiple jurisdictions are scarce. The objective of this study was to contribute to risk culture studies in Africa by comparing the retail banking risk cultures of divisions based in South Africa and Kenya but owned by the same South African financial institution. This research project followed a quantitative approach based on a risk culture survey that was employed to collect data from participants in South African and Kenyan divisions of the same parent company headquartered in South Africa. The data were analysed using descriptive and inferential statistics using the SAS® statistical package. Treating the two divisions as part of one entity, the survey evidence indicated a high maturity level in the integration of risk management in decision-making and a high maturity level of comfort in own individual roles including management and non-management staff. However, when treating the two divisions separately and comparing them, the South African and Kenyan divisions and employment levels differed significantly in terms of the integration of risk management in decision-making and the perceived comfort regarding their own individual risk roles. Effective communication and challenges regarding decision-related risks were highlighted as needing improvement concerning the inclusion of risk decision-making in the organisation, and indicated a need for increased dialogue on risk management in the divisions. The most highly ranked item for which the answers "I do not know or "I do not understand" were selected was “The organisation rewards members who take responsible risks” option, implying uncertainty among the participants with regard to the risk-based incentives of the divisions. Given the challenges of operating in different markets, the organisation would need to ensure that there is effective communication of its risk strategy at its different operations. In addition, the inclusion of risk in decision-making would need to be embedded. This could be done through risk awareness, training and development.