Uncertainty is widespread in the global market, with ever-increasing inflation and threats of recession causing economic concern. In addition, the global labor shortage is making it increasingly challenging to acquire the required skills for businesses.

In light of these ever-changing circumstances, companies must prioritize the safety and effectiveness of their most valuable asset - their workforce. To achieve this goal, you must first define the key areas for HR risk management, identifying potential threats and assessing risks within your sector. By doing so, you can develop practical and cost-effective solutions to mitigate possible risks.

The insights below can help you set up a resilient HR risk management program in your company that enables you to manage and prevent the challenges of today and tomorrow.

Smiling man sitting on stairs, having a phonecall. bookshelf in background
Smiling man sitting on stairs, having a phonecall. bookshelf in background

HR risk management and the HR department

We all manage risks in our personal lives to some degree, from relying on public transportation to deciding what to eat for dinner. However, when it comes to managing the HR risks for a company, the process is greatly complicated by the many ways in which people act and react to each other.

HR risk management looks at all aspects of employee behavior, determines its potential to cause harm to the company (including all employees) and provides a response should an adverse scenario occur.

The HR department is inescapably entwined in the lives and work of every employee from the moment they’re recruited to when they leave the company. As such, much of the responsibility for correct employee management and risk mitigation falls to human resources. Consider all the activities your HR team is involved with daily.

  • recruitment
  • onboarding
  • annual or biannual reviews
  • salary negotiations
  • interpersonal conflict resolution
  • employee engagement
  • training and development
  • promotion
  • disciplinary action
  • termination

One of the advantages of creating and maintaining an HR risk management program is that it can help you improve all aspects of human resources. For instance, removing bias from applications and interview processes also enables you to attract more diverse candidates, enhancing your workplace culture. Identifying ways to secure employee data makes a people analytics program more feasible.

why is an employee risk management plan necessary?

As much as you'd like to think that a crisis will never befall your company, it pays to be prepared for the worst. A preset course of action helps you and your team respond promptly and correctly, even when overtaxed physically or mentally. In addition, a robust strategic risk management plan can help prevent unwanted situations from occurring in the first place and more minor problems from escalating into larger ones.

Sometimes small companies, especially ones with long-time employees, may feel they don’t have to worry about employee risks. After all, their employees are like family; they would never abuse company policy, release personal information or misuse finances. Unfortunately, when the unthinkable occurs, leadership has no incident response plan to fall back on and often reacts hastily and to the company's detriment.

Larger companies, with thousands of workers, may require a great number of risk management strategies to cover all tiers of employees and all aspects of the employee experience.

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key areas for HR risk management  

While each business will have a unique subset of risks based on its industry, mode of operation and location, human resource departments within those companies often have similar areas of risk. Here are the most common areas that need to be included in your crisis management plan:

strategies for HR risk management

perform a risk audit

Your first step in managing HR risks requires a comprehensive look at what your company does, how it works and who it employs. The risks for a tech service company with 150 employees will completely differ from those of a manufacturing firm with 2,000 plus workers.

You can determine where risks lie by looking at the number and types of workers you employ and considering their daily actions. You can also analyze how significant these risks are in terms of liability and reoccurrence.

decide what level of risk your company can absorb

In most cases, you can’t remove all risks, but you can find ways to reduce their impact or the frequency in which they occur. You may use one or more of these standard risk management techniques:

  • avoidance. For example, you may find that a particular hazardous chemical poses an unacceptable amount of risk and therefore choose to use an alternative material
  • accepting and mitigating needed risks. If workers must use hazardous equipment, ensure safety precautions are fully implemented and monitored
  • sharing risks. If you have to store a large quantity of private data, consider partnering with a cybersecurity firm

You'll need to apply the above techniques to every HR risk area of your company as you consider multiple scenarios. While this can seem repetitive, it’s essential to avoiding and curtailing risk within your HR department.

revisit key risk areas for adjustments

Amid changes in worker mindsets, the global business infrastructure and technological advancements, new risk areas may pop up at any time, while others may fade away. Also, by closely monitoring how individual solutions work, you can maintain continuous improvement within each area.

The decisions you make during a business crisis can have ongoing effects. That’s why focusing on resilient risk management is so critical. Adapting and moving forward at each challenge places your company at the leading edge of the market, perfectly poised for growth.

download the guide to discover more strategies for risk management in our guide to building resilience

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