Once you’ve identified HR-related risks as described in our first article in this series, it’s time for the next step: creating a plan to (1) reduce or eliminate the probability of that risk turning into an actual problem and (2) to minimize the damage done by the risk if it manifests anyway.
The good news is that most HR organizations already perform a degree of risk management even if they don’t think about it in those terms. For example, most companies use carefully designed recruitment processes, procedures, and policies that help protect against risks like lawsuits resulting from negligent hiring. However, not all risks are appropriately recognized or planned for. Here’s how to create a risk management plan, step by step.
Step 0: Identify the risks
We covered this step in our first post in this series. If you haven’t listed the HR- and people-related risks facing your organizations, that’s ground zero for your risk management planning.
Step 1: Prioritize the risks
The initial list of HR risks may be dismayingly long, but the good news is that not every risk is equally critical. Go through the risks and score them according to (1) likelihood and (2) severity. You can use any approach you find meaningful, ranging from a numerical score to a simple description like “high”, “medium”, and “low.” This allows you to prioritize risks. Tackle “high probability, high severity” risks first.
Step 2: Assess the risks
One by one, go through the risks on your list. Ask two questions about each risk. First, what can you do to prevent the risk from happening at all? Our example above illustrates this idea: careful screening during hiring allows you to prevent many bad hires from walking through the door. Second, what can you do to minimize the damage done by the risk? If a bad hire does sneak in, how can you minimize the impact?
Step 3: Develop a risk mitigation plan
Step 2 flows seamlessly into Step 3, because the answers to the questions you ask in Step 2 will form the basis of your risk mitigation plan. You have a wide array of options. Sometimes you can simply accept the impact as a cost of doing business. Other times you might stop the activity because the seriousness and likelihood of the risk is too high. Or, you can transfer risk through insurance or using outside vendors whose core expertise might be better suited to a given activity than yours (e.g., outsourcing recruitment). Finally, you might adjust your internal policies and procedures.
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.