We are always hearing that having a proper Human Resources (HR) Risk Management plan is important to an organization. It is a precautionary measure for the HR professionals to identify the potential risks to the organization and figuring out the solutions to handle them. A well-planned risk management plan can help to mitigate the risk and minimize its impact. Some of the areas of impact include financial loss, reputational, disruption of business etc.
What is Human Resources Risk?
So what is HR risk? HR risk refers to the potential threats that arise due to several factors and can adversely affect an organization’s operations. Following are a few common HR risks that may occur in an organization:
1. Shortage of Skilled Employee
Hiring new employees in a rush, using inappropriate hiring practices, incomplete background or reference checks can cause hiring incompetent and inappropriate employees. In addition, some organizations consider training and skills development as an unnecessary investment. All of these can literally result in a critical shortage of skilled employees and eventually leads to low productivity.
2. Ethics and Behavioural Problems
Every person in an organization will be expected to show personal responsibility and follow the organization’s ethics. Nonetheless, some unethical behaviours may occur within the workplace including violence, harassment, embezzlement etc. Unethical behaviours can cause serious consequences for both employees and employers. For example, damage an organization’s reputation and credibility, losing internal security, negative ambiance of the workplace, high employee turnover etc.
3. Lack of Training and Development
Training and development is imperative in operating a successful organization. Employees who have lack of training may spend longer time finishing their jobs and ultimately reduce productivity. For certain dangerous fields such as construction and manufacturing, untrained employees are more susceptible to injuries as they lack the knowledge and skills that are required to use equipment and supplies safely.
4. Poor Compensation Packages
Employees are motivated to work harder and perform better if they have a good compensation package. Underpaid, no insurance coverage, unclear performance measures and other poor compensations will demotivate employees. Poor compensation package induces low productivity, low job satisfaction and high turnover. Eventually, it will hinder the organization achieving its organizational goals.
5. Regulatory and Compliance Risk
Each HR professional in an organization should have strong knowledge and be familiar with the local labour and employment regulations. It is essential for them to be aware of the latest regulations, ensure all employees comply and the organization’s policies reflect these regulations. Compliance risks can be a threat that will lead to legal penalties, financial loss, damage of organization’s reputation etc.
In a Nutshell
Even the slightest HR risk may result in undesirable consequences and could cause the organization to incur multiples losses, be it tangible or intangible. To reduce the impact of such potential risks, it is imperative that the HR professionals to effectively implement, enforce and execute HR risk management to prevent the organization from disruptions and losses.