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HR Risk Management Part 1: The HR Risks That Need to Be Managed

Risk is intrinsic to business (and life). Even if you closed your business down today, you wouldn’t totally escape the risks; your former risks would simply morph into new ones.

At heart, a risk is anything that can go wrong, and many businesses underestimate their HR-related risks. According to consultancy group EY: “HR risks continue to be absent from the risk management framework. Only 36% of [survey] respondents indicated HR risks are included as part of the risk management framework.”

Indeed, HR risks can be devastating to a business if not properly addressed by reducing:

· Growth, if you face staffing shortages.

· Agility, if you employee too many people, or too many people in the wrong roles.

· Cost-effectiveness, if recruitment efforts are poorly designed or employee engagement is low.

· Performance, if employees are not appropriately onboarded, trained, and supported in their work.

The good news is that most organizations have far more power to reduce the likelihood of these risks than they realize. This is where risk management comes into play: it’s the process of identifying the specific risks facing your organization and developing policies, procedures, and governance activities that will reduce the probability of that risk happening or; if it does strike, minimizing its impact.

At a high level, risk may take several forms: financial, legal, reputational, strategic, even moral. Below is a list of HR-specific risks to consider. Note that this list is not comprehensive; it’s intended to get you started formulating a list of risks specific to your situation.

· Recruitment risks: legal non-compliance (e.g., discrimination), bad decision-making (e.g., making a bad hire), future attrition (e.g., failing to follow through on promises made to the candidate), etc.

· Onboarding: liability for wrongdoing (if employees don’t sign off on a policy they then violate), future productivity problems (if onboarding fails to prepare the new hire for their work environment), etc.

· Occupational Health and Safety: employee injury or disability, or worse (if policies and training do not promote proper safety protocols), etc.

· Employee conduct: discrimination, harassment, and other inappropriate workplace behaviors (if training and onboarding do not address issues); litigation (like wrongful termination lawsuits), etc.

· Employer property: loss of proprietary information (if terminated employees can abscond with it); theft of company property (if termination procedures do not account for equipment used by employees); theft of intellectual property (if there are inadequate non-disclosure and possibly non-compete agreements); etc.

· Strategic: stagnation (if the company cannot recruit enough talent with the right skillsets); financial losses (if the company fails to comply with applicable laws and thus faces lawsuits and fines); customer loss (if the company fails to adequately deal with catastrophic employee issues that leads to major reputational damage); etc.

Identifying the risks that you face can be a time-consuming process and generate a list that is dismayingly long; but with that list in hand, organizations can begin to take proactive action to protect themselves.

CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today. 

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