‘Risk’ is an expansive concept. It extends from the chance of catastrophic disaster to things that can seem quite insignificant. The reality is all risks can serve to pull the rug out from under your organization’s feet. In particular, ‘cultural risk’ has the capacity to completely derail future plans
Human beings have never been content with what they have. Since the dawn of time, we have always looked for more. More food, more money – more friends. Naturally, national borders have never quelled our desire to make connections abroad. This is as true today as it was yesterday.
However, we have never lived in a time where making these connections has been so simple. Globalization is a concept that refers to the intensification in ties between different countries. We no longer have to wait a month for a letter to reach an aunt in Ireland; we can just shoot off an email or a direct message. It doesn’t take 3 months at sea to emigrate to a new country; it takes a few hours on a plane. What a world we live in!
Unsurprisingly, the social benefits of globalization are only trumped by its business implications. The opportunities are boundless. We can extend our operations into other countries; we can make deals with companies abroad; we can recruit employees from overseas; we can attend conferences with representatives from across the world.
In amongst this excitement and enthusiasm, it is easy to forget that the ground we are standing on is unsteady. We conceive of risk in an internal way; what are the things that are going on within our organization that can cause us and the world harm? Globalization means it is imperative that we rethink this idea. If we do not adapt our understanding of risk to encompass the problems we potentially face due to globalization, then our chances of securing impending benefits will be completely undermined.
When I talk about cultural risk, I am referring to the problems that can be brought about due to a lack of sensitivity or awareness of cultural differences. Manners are not a universal language; something that is normal in Australia might be abhorrent in China. Unless you prepare your organization for this reality, you limit your chances of growth.
For example, French, Japanese and South Korean business people all prefer to shake hands lightly. While causal chatting is encouraged in Brazil, the same cannot be said for Russia and Switzerland. In fact, personal questions about matters unrelated to business can be considered downright offensive in Japan. From this, you can see how dangerous this cultural terrain can be; one major slip up and your plans might be dashed.
Trang, Barrett and Tho’s research confirms this. Their quantitative study found that an organization’s “cultural sensitivity positively affects the quality of the relationship between partners.” The effort to demonstrate cultural awareness tells your partner that you are respectful and committed to developing strong ties between your organizations.
So what can an executive do to mitigate cultural risks?
Michael J. Collins from the CFA Institute (NYC) emphasizes how executives must keep two key ideas in mind when dealing with foreign organizations:
The Importance of Listening
What Collins is referring to here is deep, considered listening. Do not take what you hear at face value – so much can be lost in translation. Be very explicit with what you consider their expectations to be so that misconceptions can be corrected. This is the best way to stay on the same page.
Operate with Everyone in Mind
If you are doing a conference call with executives from a variety of different countries, think of a time that suits everyone. Time zones can cause havoc and it’s easy to forget that someone might be forced to wake up at 3 to take the call! If you are looking to make a good impression, perhaps it should be you taking the hit.
Conclusions
We are fortunate enough to live in a world where we can find opportunities beyond the borders of our country. In the future, countries like Indonesia and China will be the backbone of Australia’s economy; all executives know that the capacity for growth is momentous.
But success is far from guaranteed.
Executives take a measured approach to ensure organizational risk is mitigated – the same care should be extended to dealing with cultural risks. Sensitivity, awareness and education could be the difference between growth and stagnation.
Now more than ever, cultural risk management can become a unique competitive advantage.
Complete Leaders are committed to developing cultural sensitivity in themselves and their colleagues.
