Using Integrated Risk Management in Human Resources
By Jordan MacAvoy
November 18 2020 - Every modern organization operates in an environment of uncertainty. Tons of internal and external risks could affect your organizationís ability to attain its objectives. Typically, risks come in different forms, and they touch on all aspects of your organizational setup. They can arise at any time and from anywhere. Unfortunately, most organizations spend a lot of time and resources managing risks that arise from economic and commercial forces to the extent of forgetting about risks that relate to human resources.
The long-term success of any organization depends on how it manages its workforce. That also entails mitigating risks that result from having a workforce in the first place. Your organizationís culture, strategy, morale, and governance have a human element, thus the need to consider HR a critical component of your risk management strategy.
Although integrating HR and risk management sounds straightforward, many organizations with robust risk management strategies still fail to recognize gaps in their HR practices. Therefore, while undertaking risk management, you shouldnít take your eyes off the HR ball because, in doing so, youíll be missing out on your business objectives.
The HR-Risk Management Nexus
HR is an essential component of risk management because:
- Employees are the most significant source of risk since most risk exposures have a human element. Risk is caused by people, their behavior, and their actions.
- Employees play a critical role in managing risk. Their actions help mitigate risk, and if well-trained, they can be your first line of defense against risk.
A positive HR environment helps to reduce risk, besides increasing your organizationís ability to manage risks. Therefore, the significance of integrating risk management into human resource management cannot be understated. Hereís why HR and risk management are inter-connected:
- Wrong acquisition of employees could lead to positions getting filled by incompetent individuals. This not only results in poor performance but also drains your organizationís valuable executive time.
- Often, risks arise from deficiencies in employeeís abilities and skills. Therefore, improving employeesí performance also entails creating risk awareness. Aligning HR with your risk management strategy goes a long way in helping you to mitigate HR-related risks.
- An ineffective HR planning system can lead to errors in forecasting your organizationís demand and supplies. Risk management also entails predicting HR shortages, more so during the organizationís periods of growth. When such forecasts are made correctly, youíll eliminate the risk of growth stagnation and meet your strategic objectives.
How to Align HR with Risk Management
You need to ensure that all your organizationís HR activities have an element of risk management. Your HR strategy should also be aligned with the organizationís risk framework and overall business strategy. A common risk management framework should be implemented throughout the organization, and relevant HR standards should support it.
Itís best to create a culture of risk management right from the time you bring new employees on board. Roles and responsibilities should be clearly defined, more so those that relate to risk management. This way, you will implement well-defined HR risk mitigation controls to respond appropriately to any risks that may emerge.
In many organizations, the HR department rarely gets involved in risk management. This task is often seen as a preserve of top management and the finance and IT department. However, the HR department should also be part of the team that designs, implements, and maintains your organizationís risk management framework.
Key Considerations to Keep in Mind
When integrating your risk management and HR strategies, there are some key considerations to keep in mind, including:
Your Workforceís Tech Competence
Most risks that youíll encounter result from technology use. Therefore, itís best to ensure that employees understand the technologies you use at the workplace and their threats. Once they master the technology, youíll have a capable workforce that can pinpoint and mitigate the risks you face.
In recent years, multiple regulations have been implemented, mostly for data security purposes. As you educate your employees about risk, itís equally important to create awareness about data security. Regulatory agencies are increasingly cracking down on the methods that organizations collect, store, and transmit data. Therefore, HR teams should be at the forefront of helping organizations mitigate risks relating to data compliance regulations.
Your Onboarding Strategies
Thanks to cutthroat competition in the labor market, many organizations are struggling to attract, recruit, and retain talented employees. Itís essential to align your onboarding strategy with your risk management strategy. This will enable you to bring onboard employees who meet your organizationís quality standards. Itís best to keep in mind that your workforce's quality determines your ability to handle risks.
Risk is an inevitable element of organizational management. Since employees are your organizationís primary risk vector, itís essential to use integrated risk management in human resources. Likewise, the role of the HR department in risk management shouldnít be understated.
Jordan MacAvoy is the Vice President of Marketing at Reciprocity Labs and manages the companyís go-to-market strategy and execution. Prior to joining Reciprocity, Mr. MacAvoy served in executive roles at Fundbox, a Forbes Next Billion Dollar Company, and Intuit, via their acquisition of the SaaS marketing and communications solution, Demandforce.