In our first post in this risk management series, we noted how few HR organizations address people-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.”
In our next post in the series – “Creating Your Risk Management Plan” – we laid out the three foundational steps: (1) prioritize the risks, (2) assess the risks, and (3) develop a risk mitigation plan.
To comprehensively address the risks affecting your business, however, requires fourth step: monitoring.
Risks change over time, and a risk management plan that falls out of date will be unhelpful and possibly counter-productive. Instead, organizations should identify metrics that will help them track risks, report on those metrics, and revisit the initial three steps as needed.
For example, according to The International Public Management Association for Human Resources (IPMA-HR), the top five HR risks include:
1. Shortage of critical skills internally
2. Compliance regulatory issues
3. Succession planning
4. Gap between current talent capacity and business goals
5. Shortage of critical skills externally (vendors and outsourcing)
In an initial risk assessment, an organization might feel confident about its workforce possessing critical skills. But over time, skilled and experienced employees might retire or resign, and the organization might end up risking a deficit in needed skills.
Sometimes business growth will cause a change in a company’s risk profile. For example, worker misclassification issues can be existential for startups and small companies if they end up facing litigation or penalties for violations. But as an organization grows, its legal, financial, and/or political resources might enable it to survive questions around worker classification (like ridesharing service provider Uber). In other words, as a company starts out, this risk might be business-ending. But as the company grows, this specific risk might be displaced by others in priority or severity. (It’s worth nothing that classifying workers correctly from the beginning eliminates this risk altogether).
In short, risks can shift significantly as organizations and the markets they inhabit change over time. Risks need to be monitored regularly, if not continuously, and any risk management plan should be treated as a living, breathing document.
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.