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Using Data to Measure Cultural Risk

It seems like we are always looking for ways to assess our ethics and compliance culture.  Is it really possible?  Even if areas like culture, which can be tricky to assess and measure…we can see some evidence of some innovative ways to look at concrete data points to develop a risk mitigation strategy.  For example, using the data provided by Geert Hofstede’s research database, it’s possible to compare national cultures along the dimensions pioneered by Hofstede.

One of the precursors of cultural risk is cultural misunderstanding. If the differences between cultures are substantial, there is a higher risk for issues of corruption going unnoticed.  By using Hofstede’s data and mapping to the countries where a company does business, we can uncover possible areas of misunderstanding.  Having identified these possible risk areas, it is then possible to develop strategies to combat them. For example, as illustrated by the graphic below, by comparing the U.S and China, we see that the countries are very different on Power Distance, Individualism, and Long Term Orientation. 

By way of illustration, the Power Distance dimension measures the degree to which a culture is comfortable with hierarchy and differences in power among members of a society.  According to these data, there is a significant difference between China (with a high PDI) and the U.S. (with a low PDI). Given the importance of a “speak up” corporate culture, in which employees feel comfortable raising possible issues of concern, it stands to reason that the tools used in the U.S. to create and sustain a “speak up” culture might be insufficient in China. By using this information to allocate resources (and develop strategies), the Compliance and Ethics officer with international responsibilities will be better equipped to combat not only corruption and bribery, but issues across the C&E landscape

James D. Meacham

James Meacham is Director of Consulting on SAI Global’s Advisory Services team and specializes in business ethics, cultural and behavioral influences on ethics risk and compliance, strategic corporate governance, and GRC technologies.

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