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IAI Actuarial Core Principles · Business Management · Communicating strategy; culture and structure in decision making; strategy case studies

An Indian reinsurance firm is organised around a strong 'role culture' in which clear job descriptions, rules and procedures govern all work. It now wishes to pursue a fast-moving strategy of launching new parametric cover for climate events through small project teams. Which is the most likely difficulty?

The likely difficulty is that the role culture's rigid rules and defined roles slow the experimentation and rapid decision-making that launching new parametric products requires. Role cultures favour stability and procedure, whereas the new strategy calls for a flexible, project-oriented task culture.

  1. ARole cultures are unable to produce any financial reports
  2. BRigid rules and defined roles may slow the experimentation and rapid decisions the new strategy needsCorrect
  3. CProject teams are prohibited under Indian company law
  4. DA role culture always leads to excessive risk-taking
  5. The strategy would automatically become irrelevant

Explanation

A role culture (Handy) values stability, procedure and predictability, which suits stable environments. Innovation through project teams needs flexibility and quick decisions, resembling a task culture. The mismatch therefore slows execution; the other options are incorrect statements about role cultures or the law.

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