Navigating the world of work is becoming increasingly challenging, and there are many HR risks that organizations need to handle to stay compliant and thrive. Let’s dive into all you need to know about HR risk management.
There is no way to avoid risk in business. Risk management is anticipating and preparing for potential downfalls to minimize consequences. Organizations have to apply risk management across their entire operations, but HR should focus on the risks it’s uniquely responsible for.
Risk management in HR means assessing and dealing with the potential risks that come with having a workforce. These risks are related to how you hire, retain, and manage employees and other types of workers, as well as employee behavior.
HR risk management is about contemplating likely scenarios and outcomes so you can minimize precarious situations, have adequate solutions in place, and even prevent problems from ever occurring.
How to apply these techniques to HR will depend on your organization’s situation. It’s up to you to decide which of these methods makes the most sense for each risk area.
HR professionals need to consider many HR risk management issues in their jobs. Here are seven examples:
The complexities of employing people pose challenges for any organization. Matters such as turnover, employee burnout, employee relations, workplace conflict and harassment, and lack of employee engagement all have the potential to negatively impact the company and prevent it from thriving.
Modifications in the way people work bring new risk factors. An example is offering remote/hybrid work setup. Employees may find this desirable, but a lack of in-person dialogue and connection can lead to feeling isolated and communication failures. This can decrease employee engagement and productivity.
On the other hand, not offering this might lead to employees leaving for organizations that do.
Cybersecurity and data privacy are crucial responsibilities for every organization. You must manage employee data collection and storage safely and ethically, as well as have a privacy policy in place. Additionally, you must hold employees who handle sensitive customer data to high standards.
Security breaches or misuse of personal information can leave companies vulnerable to lawsuits and brand damage. HR needs to ensure that the data is secure and used properly.
Human Resources activities and policies need to be in line with many laws and regulations, often across states and countries.
To stay on top of HR compliance, you must remain current on workplace safety and labor laws that continually change. This includes ensuring that all employee contracts are in agreement with applicable statutes and regulations.
HR is central in ensuring that organizations behave ethically regarding employees. Upholding ethical hiring and employment practices will help reduce the risk of employer-employee disputes.
HR is responsible for ensuring the company has staff with the right proficiencies to achieve organizational goals. Employees also want to grow in their careers, and they look to broaden their skills within the workplace.
While learning opportunities are based on organizational capabilities and competency needs, HR must also ensure that all employees have equal access to them. Limiting who can attend may seem unfair to those who are excluded.
Fair pay and benefits should be maintained throughout the entire workforce. HR needs to balance how to provide competitive and fair compensation packages that are in line with the market and the company’s financial interests.
They also need to ensure pay equity and inclusive employee benefits offering. Doing so will support compliance with regulatory requirements and help employees feel like they are being treated impartially.
There are many risks associated with the M&A process that involve staffing and other HR matters, so HR professionals play a vital role. For instance, turnover is often a significant issue within leadership. Research shows that “[a]pproximately 50-75% of key managers leave voluntarily within two to three years after a company has been acquired.”
When leaders depart too soon, it disrupts the M&A transition. Ideally, HR will help minimize turnover to reinforce success for the newly formed business.
Having an HR risk management plan puts you in a position to prevent or appropriately deal with problematic employee situations. It can protect the safety and well-being of both employees and the organization in the following ways:
A successful HR risk management strategy must be intentional. Here are five steps to get you started:
Conduct an HR audit to see which practices at your organization are lacking and what you need to prioritize improving.
Think about the general risks that every enterprise faces and also liabilities that may be unique to your industry/company. For instance, an in-home caregiving business must consider what could go wrong when employees work alone with vulnerable clients, or what would happen if they work with an expired license.
You’re not going to be able to manage all risks at once, but they won’t be equally critical. Line up what you need to do first. For example, you might prioritize areas that put you at legal risk, such as compliance problems or pay inequity.
If you don’t have those, start working off of your organizational goals to see how managing which risks will bring you closer to achieving those goals.
Now it’s time to decide what to do to minimize the risks you’ve identified. Start with determining the right risk management techniques. Then, you need to come up with solutions and start implementing them.
Here are two HR risk management examples of opting for the loss prevention and reduction approach:
An employee who is untrustworthy in their duties or causes a hostile work environment for others can pose multiple risks for an employer.
Weak cybersecurity or failure to comply with employment laws or industry safety regulations can result in breaches, fines, accidents, or litigation. Following all the guidelines is essential, but there is no guarantee that you’ll avoid all problems.
Human Resources risk management is an ongoing cycle. You’ll need a consistent risk assessment to be aware of everything your organization is exposed to. Setting up a process for this will ensure you can be proactive in evaluating and resolving risks as they arise.
Developing your HR risk management skills will benefit your organization from a long-term perspective. What’s more, they’re increasingly important future HR skills that will help you stay relevant as an HR professional.
One way to improve these skills is to team up with another department that is more advanced in risk management for a workshop.
As you cultivate a risk management perspective, you’ll be able to act more strategically. Stay curious about developments going on within your particular business. Then you can anticipate how they might pose risks to HR and be able to stay on top of any changes that need to be made.
As the business ecosystem remains volatile, HR has to keep up. HR risk management enables HR teams to proactively approach issues within their area of expertise and make sure that the organization can function smoothly and effectively.
