Risk Management Lessons from Denmark
October was a great month! Business travel is back and I had a backlog of in-person engagements across London, Paris, Copenhagen, Zurich, and New York. It is good to be back on the road and meet people around the world in the context of my research into governance, risk management, and compliance (GRC) challenges organizations face and how they solve that with strategy, process, and technology.
On this series of trips, I finally got to my ancestral homeland of Denmark (30 to 40% Danish, and the source of my last name). In all of my travels around the world over the past several decades . . . this was my first trip to Denmark (Copenhagen). My paternal grandfather came from Denmark. I am told that I have a great uncle that was a leader in the underground railroad in Denmark helping the Jews escape Germany. I am also told that one of my ancestors was the inventor of the Danish hot dog cart on street corners. So I was anxious to see this part of my ancestral homeland as I presented my research on the top GRC drivers and trends for 2021 and into 2022 to risk management and compliance executives at Scandinavian companies.
What struck me in my visit to Denmark was the culture of trust and thus the culture of risk management and control. Denmark prides itself on being a society of trust. This is evident in their business environment as they have a fairly low rate of fraud and wrongdoing.
This culture of trust is also evident in their mass transit. I took the train into downtown Copenhagen. I purchased a ticket for the train but was able to walk right on board without going through any gate or presenting the ticket to anyone. There was no turnstile. Nothing of the sort. On the way back to the hotel I took a taxi so I can see more of the city. I asked the taxi driver about this, and he explained it was part of their culture to trust. Danish people will do the right thing and there is a very low occurrence of abuse of the system. In fact, he stated that it would cost more to put in controls and validate tickets than what they would recover in abuse.
Two things to consider in this context . . .
- Risk and trust culture. The Danish people have built a positive culture of trust that impacts their risk culture. I am curious in researching how this has developed over time and what brought them to this strong, positive culture.
- Cost of controls related to risk exposure. The Danish people understand their risk exposure, in this case very little, and decided that risk acceptance is the best path forward and not further controls to mitigate risk. They realize that the cost of controls to enforce honesty on the few perpetrators is greater than what they would recover.
The key element here is that the culture of trust is critical. I do not think you could eliminate turnstiles and related controls in mass transit in the USA, United Kingdom, and many other places I visit. There would be too much abuse of the system and the cost of controls would be worth the enforcement. Denmark can do this because it has developed and nurtured a culture of trust where this works.
In our organizations, the key question is how can we improve our culture of trust and risk management? Also, there may be certain areas where you have controls that do not make sense. The cost of controls may outweigh the value they preserve and protect.
Hi Michael,
It is true, the Danish society has a very high level of trust. This has been demonstrated in several research articles as well as in the book Speed of Trust by Steven Covey. Hillary Clinton has a chapter of this in her book “It takes a village to raise a child” where she describes that Danish parents will leave their children unattended outdoor for an afternoon nap (also in city courtyards).
This level of trust has been built over centuries and is now founded on a very high level of equality. We do have very, but not extremely, rich people in Denmark, but the number of poor people is miniscule due to governmental support systems (paid by, yes, the highest taxation level in the world). Hence, no-one are “forced” into crime to survive – and very few will make commit crimes for a small benefit (like a train ticket or a shop-lifting or the like). Denmark is a small, tightly knit, society, and becoming criminal does not really make sense.
This is a benefit which companies leverage as they do not have to impose costly and rigid control systems to avoid being robbed. This enhances agility and reduce costs.
Hans, thank you for the additional perspective and confirmation.