A conversation that translates - FT.com Risk is a risky word. Already prone to misinterpretation among people who share a language and a culture, the difficulties multiply dangerously when it moves across borders. What a Wall Street trader might define as moderately risky may seem downright insane to a Japanese retail broker; what an oil pipeline engineer in Brazil might characterise as gung-ho may appear overcautious to his revenue-chasing chief executive in London. Philip Delves Broughton "The perception of risk and uncertainty is very different across cultures," says Javier Gimeno, a professor of international risk and strategic management at Insead. In some cultures, there is a very high level of uncertainty avoidance. People avoid discussing things where there is uncertainty, or imitate their competitors just to feel the safety of doing the same thing. In some Mediterranean and Arabic cultures, he has observed a "strong sense of fatalism or destiny. You don't want to talk about possible scenarios and possible risks. No one wants to be the person bringing up the risk, which makes the communication of risks difficult. Since the explosion of BP's Macondo well in the Gulf of Mexico two years ago, students of risk have been poring over the causes. An important factor appears to have been a failure in communication between BP's London headquarters and its US operations over the balance between internal control and operational aggression. Richard Anderson, head of the Institute of Risk Management, a professional training body in London, says that years before the accident, Lord Browne, then chief executive of BP, told his internal auditors that the philosophy for internal control was "we don't like surprises." In the UK, says Mr Anderson, managers took this to mean they should alert their superiors to any looming problems, whereas in the US, some misconstrued Lord Browne's instructions to mean nasty surprises were to be hidden. "Language always comes with a set of cultural baggage," says Mr Anderson, who has studied the affair. That was definitely evident in that case. Since the financial crisis, banks have been criticised for relying too much on value-at-risk models - which calculate the risk of a bank's position based on historic probability of adverse events over time - that failed to account for the severity of what was to occur in 2008. But, says Prof Gimeno, VAR remains a useful tool provided it is only one of several used by organisations. The challenge is that so much risk can escape the scrutiny of even the most sophisticated risk management tools. Oil companies, for example, measure risk in all kinds of ways, from political risk and operational risk to the macroeconomic factors that might lead to fluctuating oil prices. But these measurements are next to useless without open communication and shared assumptions about language. "An important dimension in risk management is the extent to which there is vertical communication within a company," says Prof Gimeno. Compare a Dutch company - where an employee can talk easily to his superior - to a Japanese or Korean company, where there is a big separation between the ranks. This can lead to communication not being pushed upward. This isn't just company cultures, it's national culture. The potential nightmare arises when a company knows less than the individuals within it because of lack of communication between the ranks. The growing field of enterprise risk management seeks to crack this problem by guiding organisations on improving structures and governance around risk. "It is about settling on a way to identify, assess and respond to risk in [a] way that is culturally consistent across the organisation," says Mr Anderson. Organisations are starting to define their risk so that language does not break down across boundaries. The relatively new breed of risk professionals also aims toprovide the kind of hard intelligence that will pierce what Mr Anderson calls the "perfect place arrogance" that can beset multinationals. Companies with strong national identities risk thinking that what they do at home will work equally well abroad. "They think "just because we've been successful on Wall Street, we can do the same thing in London, Tokyo and Frankfurt."" Such thinking can be challenged with trenchant assessments of the risks present in each new market. The challenge ofERM is to find the right balance between operating as yet another audit system and building risk-orientated thinking into day-to-day management. John Ludlow, vice-president for global risk management at InterContinental Hotels Group, runs a $100m budget to manage risk across IHG's 4,600 hotels in 100 countries. What ties IHG employees" everyday actions to the company's strategic view of risk is a determination to "champion and protect our brands." This sense of the brand being the most important asset is what aligns the many activities that fall under the category of "risk." Mr Ludlow says understanding context - more so than language - is the first step in any global risk management plan. In any country in the world, people consider risk in terms of the law, logic and relationships, but in different orders of importance: "In China, it's relationships first and the law third. In the US, it's law first, then logic, then relationships. At IHG, risks range from picking local developers and operators to ensuring the safety of guests and staff during any natural disaster or attack. Mr Ludlow's team includes recruits from the military and intelligence services for their expertise at gathering information, as well as operational experts capable of implementing a 2,000-page volume of policies and standards. The latter range from knife safety in kitchens to evacuation plans in the event of extreme political unrest. "We have e-learning and safety training in different languages for people at different levels of the organisation," he says. Each day, there are checklists, 10-minute online campaigns and poster campaigns. The greatest pitfalls in managing risk across borders, he says, emerge from assuming too much. When dealing with fellow English speakers, it is easy to imagine that a shared language means shared assumptions - that the English, Americans and Australians think the same thing because they are using the same words. With less familiar cultures, all kinds of unpredicted mistakes can occur. In your own culture, you can assume so much. But when you're dealing with different cultures, you can do your best but you have to go [further] to make sure that what you both think you've done is the same thing.