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VIEWPOINT: People and HR risks

We encounter risk on a daily basis, as everything we do has an element of risk associated with it.

Employees are one of an organisation’s greatest assets, but they are also a source of risk. Employees reflect the organisation’s values, talent, education, experience and success. Understanding the risks associated with employees is a priority for business leaders.

It is important that a distinction be made between people risk and human resource risk.

People risk can be defined as the risk that people do not follow the organisation’s procedures, practices and rules: they therefore deviate from the expected behaviour in the organisation.

There are two components of people risk: human error and human fraud. Both are difficult to control, as their causes are often hard to identify. No matter how good an organisation’s systems and procedures are, if an employee becomes unreliable, the organisation will find it difficult to prevent fraud or mistakes.

On the other hand, if we look at the HR function, HR faces extraordinary demands to be effective and efficient. Some examples of HR risks are: inadequate recruitment processes, inadequate training, retaining and maintaining skilled staff, and talent management programmes.

In our various industries, each job or position has its own salary structure and demand. While companies strive to secure talent, organisation size makes a big difference during recruiting. Large companies generally offer more job security than smaller ones, but the latter can offer the chance to experience more in a shorter time.

Employee retention – especially of your quality and most experienced employees – is a key challenge in companies today, and the staff you hire will make or break your business.

Competition for talent is increasing and it’s becoming challenging to strike the balance between paying enough to retain top talent and adhering to the salary budget. Talent retention therefore continues to be the concern among organisations.

The skills gap also continues to be a top concern for most businesses. Whilst unemployment is high, companies are struggling to find employees with specific skills to meet their requirements. Employers also want experienced candidates who can contribute immediately with no training or start-up time.

There are many approaches to deal with people and HR risks. To name but a few: compensation packages and rewards, benefits, work-life balance initiatives, well-designed assessment and selection processes, talent management processes in developing skilled talent pools, and encouraging succession planning, implementation of training and development programmes.

Employers need to ensure that they have plans in place to appropriately deal with people risks and HR risks. ❐

Author: Suzanne Harrop-Allin CA(SA)