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What is HR Risk Management

TRANSFUNNEL CONSULTING
TRANSFUNNEL CONSULTING Dec 01, 2021

HR RISK MANAGEMENT 

What’s the risk?

Not having the right people in place with the skills you need to compete, innovate or grow can seriously hamper an organisation’s future.

“Look at how many companies want to grow in emerging markets,” says Conference Board’s Mary Young. “Their biggest concern is not finding the right people.”

Industries with an ageing workforce – such as oil and gas where it is predicted that 50% of the workforce will be retiring by 2015 – have even more to worry about.

Why should HR care?

As Young says: “These are things HR does all day. It’s your bread and butter.” HR probably already looks at workforce planning in terms of risk management, but now you need to translate that to the rest of the organisation.

What to do now:

Collect data and analysis that builds a compelling case for adding this to the enterprise risk map. Concentrate on getting it on the business’s agenda if it’s not there already.

1. Workplace Culture

From our experience, there are two major types of workplace culture.  First, we have the team culture that unites everyone in the organization to achieve the desired goals of the organization’s leadership.  This culture is typically embodied in how business is conducted, what kind of comradery is shared by everyone, how unified efforts are, and how well communication flows from one side of the org chart to the other (and everywhere in between).  Building this type of culture is a different process for every organization.  Sometimes a very charismatic leadership can set the tone, and everyone buys in.  In very ‘flat’ organizations it can be a common rallying cry or shared purpose/cause that ties everyone together.  Whatever the source, you need to cultivate and hire folks that will fit in with that culture and either maintain it or improve it. 

The second culture is one of safety and risk management.  Simon Sinek is famous for writing the book ‘Start with Why’ to explain that customers or business partners care more about Why you do something before they even think about How you do it.  Well I’m here to tell you that the How is a very close second!  How you operate needs to include a huge dose of an organization-wide safety and risk management culture.  Why?  Because how you operate needs to include a consideration of risk vs. reward and opportunity cost.  Check out the video below for a deeper dive into cultivating an Organization-wide Culture of Safety & Risk Management.

 So how can both Team and Safety & Risk Management culture break down and harm your organization?

  • Employee Unrest – caused by either the perception of unfair treatment or concern over the direction of the organization. Impact: higher employee turnover, decreased morale, decreased productivity, and a drag on overall growth.

  • Lack of Leadership – most organizational failures relate back to a breakdown in leadership. This is never more apparent than cultural failures.  Leadership needs to buy in and practice what they preach in both of these areas.  ‘Do as I say and not as I do’ is a recipe for disaster here.

  • Uncontrollable circumstances – these can run the gamut from catastrophic weather to economic crisis. In these situations, a strong culture can save the organization.  However, it is exceedingly rare that a lackluster culture is improved by an external crisis.  Typically, even average organizational cultures fail during chaotic circumstances.

 2. Network & Data Security Risks

Hackers can gain access to your network and data several different ways.  One of the most frequently exploited channels is your employees’ behavior.  From opening suspicious emails to voluntary sending log-in credentials or financial information, your staff is on the front line of combatting intrusion or possibly opening the door, so a hacker can waltz right on in.  The key here is training and awareness because the causes mostly relate back to improperly followed procedures. 

Potential costs:

  • Lost data

  • Network and business interruption

  • Lost revenue during down time

  • Costs to fix the damage or replace the data

  • Forensic audits

  • Regulatory fines & penalties

 

 3. Theft & Embezzlement

Theft is a very common and often difficult risk of loss to protect against. It seems like every year there is a story about a disgruntled or financially strapped employee that has pocketed a large sum of employer money.  The causes here vary but often it comes down to an employee who has fallen on hard times, has a behavioral issue (ie – gambling habit), or is disgruntled and wants to settle the score.  The ultimate losses here are any assets that are unrecoverable, the loss of an employee (sometimes they’re even really good at their job), and any public relations exposure associated with the event/s. 

 

4. Training & Competency

This risk really crosses every aspect of your organization’s daily operations.  Training & Competency failures typically result from a poor or missing program that doesn’t set your employees up for success.  Causes here are usually apathy or unawareness of training deficiencies.  The results are across the board from liability lawsuits brought by customers or outside third-parties, a hacking event, an employment liability claim, repeated workers comp injuries, and even all the awful effects of an employee death.  Most Risk Management Services programs focus heavily on training.

Conclusion:

Human Resource risks are present at every step of the hiring, retention, and daily operations processes.  Take a proactive approach and make sure that human resources planning is always top of mind.  If it isn’t, the consequences will sneak up on you and these issues have a habit of snowballing.  So be safe, get out ahead of them. 

 

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