OFSI issues guidelines for Culture Risk Management and seeks for input by May 31, 2022

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OFSI | Mar 15, 2022

OFSI culture risk management guidance - OFSI issues guidelines for Culture Risk Management and seeks for input by May 31, 2022 The Office of the Superintendent of Financial Institutions (OSFI) examines the culture practices of federally regulated financial institutions (FRFIs) and how the risks created, perpetuated, or magnified by a FRFI’s culture can affect their safety and soundness. OSFI plans to issue a principles-based, outcomes-focused culture risk management guideline for consultation in late 2022.

Proposed outcomes of culture risk management guidance

As part of its future guidance, OSFI will expect FRFIs to establish and maintain a robust approach to manage and oversee culture risks. OSFI is proposing six prudential outcomes that FRFIs should achieve to support effective culture risk management.

See: OFSI Publishes Draft Guidelines on Technology and Cyber Risk Management

Leadership: Leaders, at all levels, consistently promote and reinforce the desired culture through their words, actions and decisions.
Compensation, People Management & Incentives: The FRFI acquires, develops, retains, compensates, and incentivizes executives, material risk-takers and all other employees to promote and reinforce its desired culture, effective culture risk management, and achieve sound financial and non-financial outcomes.
Accountability & Ownership: Individuals have a clear understanding of their roles and responsibilities, have capacity and autonomy to fulfill them, take ownership of their decisions and actions, and are held accountable for them.
Risk Mindsets & Behaviours: Risk mindsets and behaviours within the FRFI align with and support the structures in place to ensure financial and non-financial risks are effectively managed.
Group Dynamics & Decision-Making: The work environment enables individuals to feel safe to speak up, openly communicate and work together to make sound decisions and achieve financial and non-financial outcomes.
Resilience: Individuals are vigilant towards known and unknown threats, notice and effectively respond to problems and opportunities, and continuously learn, improve, and adapt to changing conditions.

See: Culture: Why regulators should care about diversity and inclusion

OSFI is seeking comments on the following questions

What are your views on OSFI’s proposed culture risk management outcomes? Are there other outcomes OSFI should consider?
Which of the outcomes outlined above is your organization currently overseeing as part of its culture risk management? How is your organization measuring and assessing culture risks in these areas?
Is your organization proactively disclosing culture risk management information as part of its published annual reports? Why or why not? Do you foresee any challenges if OSFI were to expect FRFIs to enhance existing annual reporting requirements to include this information?
Does a FRFI’s size, nature, complexity, risk profile or various sub-cultures (e.g., differences between geographies, business units or functions) give rise to specific culture risk management issues that OSFI should consider?
How do culture risks influence the way FRPPs are managed and administered? What are the benefits of similar outcomes-focused guidance for FRPPs?

Stakeholders can submit comments to Culture@osfi-bsif.gc.ca by May 31, 2022.

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