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HR Risk Management Part 4: How to Spot the Risks You Don’t Think About

In our first post in this risk management series, we discussed how important it is to identify HR-specific risks. Then, in our next post, we laid out the three foundational steps to managing those risks. But comprehensively protecting against HR risks requires ongoing monitoring, which we covered in our third post in the series.

Today, we’re going to add a critical question to consider: how can you monitor and manage risks you don’t even know about? Specifically, what about “unknown unknowns”?

That funny phrasing comes from the military. Former Secretary of Defense Donald Rumsfeld puts it this way:  “As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know… It is the latter category that tend to be the difficult ones.”

That quote is a mouthful, but the idea of “unknown unknowns” is valuable. Unfortunately, according to Discover Magazine, people have a blind spot when it comes to unknown unknowns, “because it takes a bit of expertise just to know how much you don’t know about something.”

In the HR world, these unknown unknowns are the risks to which organizations are exposed without realizing it. Without that knowledge, they cannot manage or monitor such risks; if the issue explodes into a crisis, the organization will be blindsided. So how can business owners and leaders prepare themselves?

First, ensure you have – or have access to – comprehensive HR expertise.

HR is a wide field with a lot of intricacies and subtleties, and companies with small or even nonexistent internal HR organizations may not have the depth and breadth of knowledge needed to name all relevant HR risks. This is particularly a concern at small and midsize businesses.

Then, get an outside perspective.

HR can be affected by other risks, too. For example, HR groups typically operate technologies that help them in day-to-day tasks. But knowledge of HR does not necessarily translate into technological expertise. Consulting with IT can help identify IT-related risks that could impact HR systems. This is also why legal departments or advisors typically consult with HR on new policies and initiatives.

Try a “premortem.”

This idea comes from The Harvard Business Review (HBR), which suggests that organizations “war-game your potential failures.” The idea is to run a simulation where some aspect of operations has failed, and leaders have to figure out why. Some risks are inherently unknowable; no amount of expertise will help identify them. A premortem is a chance to unearth such risks. HBR has a guide to conducting premortems here.

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.