Risk management involves looking out for potential risks to the business. And to be prepared with the best solutions to handle them. Risk management is incorporated into all planning and decision-making in an organization. But, the specific focus of this post is risk management as it applies to HR activities.

HR risk management focuses on the risks managing employees pose to the business. This could involve risks around the way we hire, manage and lose employees.

Proper HR risk management would focus on everyone employed. From part-time employees to the company leaders, all are taken into account to help HR measure risks and prevent issues.

Why Risk Management Matters

Regardless of the industry or size of the organization, there will be risks associated with managing people. HR risk management should be an important part of any business’s roadmap to success.

When developing a risk management plan for your HR activities, there are many areas to focus on. We will focus on some of these areas in general. It is important for you to review all the activities and functional areas within HR. Every organization will have its own risk management process. Identify and check the risks unique to your organization.

Compliance and Regulations

It is very important for people in HR to be aware of local labor laws and regulations. They need to ensure that the organization’s policies, procedures, and practices are compliant. All the HR processes should be regularly audited to ensure that you’re as compliant as possible.

Laws can change and sometimes at a short notice. If you as HR aren’t aware of any new changes, you could be at risk of non-compliance, fines, and even lawsuits. Subscribe to local legal publications and set up news alerts for employment law.

Compensation & Benefits

Look for any financial risks. Create a checklist that contains information on who has signing authority. Identify who is recommending a change in compensation, who is reviewing and approving.

Hiring practices

While reviewing your HR policies and practices, look for certain areas of risks. Are there any discriminatory hiring practices? For example, are your job ads and candidate screening processes free from any discriminatory practices? Are you vetting your candidates through a background check process?

Other than compliance risks, there can be risks of failure in resource planning. Understaffing, or overstaffing of employees is not so uncommon. Not able to meet the resource needs can lead to business losses. And overstaffing can cause a lot of chaos in the workplace.

Onboarding Process

Did the employee sign off on the policies and contract of employment before being hired? Do you have a formal onboarding process in place? Does it help the employee understand their roles, the company policies, and procedures? On many occasions, we find that employees make costly mistakes. Such can be traced back to a lack of proper training or communication during onboarding.

Health & Safety

As an employer, it is the organization’s duty to provide a safe workplace. Do you conduct safety checks? Do you provide adequate training for staff? Do you ensure the use of appropriate clothing and safety equipment? Do you have adequate policies, procedures, and committees in place?

Employee Conduct

This is one area in HR that we deal with every day, yet we sometimes do not remember to review. Things to review and audit will include written policies, job descriptions, training. Access and distribution of these documents are important. Do you provide help or ongoing training about policies and procedures? If there are performance or conduct issues, do you have a process to record those? What is your process of dealing with harassment complaints and how do you resolve such cases?

These are only some of the examples of areas in HR to consider for risk management.

The high-level steps involved in managing risks are:

  • Identifying the risk
  • Develop strategies for mitigating the risk
  • Put in place those strategies
  • Monitor regularly. Keep checking if you need to change anything in your risk management checklist.

Finally, identify who will be responsible to review and monitor the risk registry for your HR department.

If you need help with your policies and processes, please contact us for a free consultation.