MAS Links Culture to Risk Remediation

The Monetary Authority of Singapore (MAS) has published a new information paper explaining how culture influences whether financial institutions (FIs) achieve sustainable change following serious risk events.

The paper argues that recurring risks often signal deep-seated cultural problems that cannot be resolved by addressing control deficiencies alone. Lasting remediation is unlikely if the cultural conditions that gave rise to those weaknesses remain unchanged, and meaningful improvement requires attention to how people within an organization think, behave, and make decisions, MAS asserts.

Through its supervision, MAS has observed behavioral patterns that suggest cultural issues contribute to risk build-up. These include leadership’s excessive focus on short-term objectives and a failure to learn from past mistakes. Among staff, common patterns include avoiding accountability, inconsistent execution of controls, and a reluctance to escalate concerns. The paper links these behaviors to underlying drivers such as leaders not modeling desired conduct, a lack of psychological safety, and incentive structures that reward business targets over ethical conduct and sound risk management.

The paper outlines a framework of four core capabilities for Boards and senior management to influence these drivers:

• Establish leadership and oversight to steer the desired culture;
• Conduct robust, evidence-based root cause analysis to identify behavioral patterns and cultural drivers underlying repeated risk events;
• Develop a set of targeted and interconnected interventions; and
• Monitor and validate that such interventions are driving effective and sustainable change toward the desired culture, providing a feedback loop to leadership.

The paper emphasizes that the Board and senior management are ultimately accountable for shaping and sustaining a sound organizational culture. While the paper's focus is on remediation after an event, MAS encourages FIs to build these capabilities pre-emptively to identify and mitigate risks before they result in serious incidents. “Applied well, these practices help FIs move beyond treating symptoms to strengthen learning from risk events and sustain improvements over time,” MAS concludes.