How do informal financial policies develop within an organization?

Informal financial policies within an organization develop primarily through a process of evolution influenced by various factors, including the organizational culture, historical practices, and the influence of key individuals, particularly those with significant authority or expertise. As members navigate the complexities of financial decision-making, they often create unwritten rules and norms based on experiences and observations.

The influence of a powerful member, such as a senior manager or a finance director, can shape these policies, as their practices and preferences can become accepted as the norm within the organization. Over time, these informal policies may adapt to changing circumstances or organizational needs, effectively reflecting the underlying values and priorities of the group.

This dynamic nature of informal policies contrasts with practices that are strictly enforced by external regulations or dictated by the board of directors, which tend to be more formal and structured. Additionally, informal policies are typically not documented or published, as they operate outside the formal policy framework of the organization. Therefore, the development of these informal financial policies is best understood as an organic and iterative process rather than a top-down imposition or explicit documentation.