The compliance landscape and the needs of employees are constantly evolving, so it is no surprise that employers find cultivating a compliant environment while meeting the needs of employees extremely challenging. Though not exhaustive, the intersection of the factors above equates to a human resources risk.
There are several risk frameworks that consider human resources risks; however, this writer selected the Community of Sponsoring Organisation (COSO) Framework. In COSO's view, human resource management (HRM) is an organisational governance technique. The objective of COSO is to increase the efficiency and effectiveness of business operations, the accuracy of financial reporting, and compliance with applicable laws and regulations. Therefore, HRM policies and practices, for example, should enable organisations to achieve organisational objectives and goals.
As an example of the importance of human resources risks, Gresa Mjaku and Abdylmenaf Bexheti in their academic paper titled: Environment control and risk assessment as COSO framework elements and their impact on entity performance: a case study in the Republic of Kosovo demonstrated that the control environment, including culture, transparency, structure, and management of human resources, had a 73% effect on entity performance.
This article (Part I of a two-part series) will identify three critical human resource risks. These risks are in no way all-inclusive.
Employee health & wellbeing
The workplace health and safety (WHS) function should be one of the most risk-based functions within HRM. In fact, the basic elements of a health and safety function involve identifying ways to monitor and manage physical and psychological risks to employees. Quantifying this risk whenever possible is an important consideration. QHS measures include but are not limited to injury and illness rates, severity and frequency of accidents and fatalities as lag indicators of safety performance. Conversely, lead indicators include employee safety control, co-worker safety response and safety culture.
Productivity
Research supports that productivity metrics are linked to the organisation's human resources. For instance, productivity can be negatively impacted without effective project management practices, while project safety and health can be compromised. Moreover, organisations must consider the issue of presenteeism (employees who come to work when they should be absent due to illness) and the potential risks this poses to the organisation. In addition, ineffective organisational change can adversely affect employee productivity, turnover, and health and wellbeing.
Turnover in the workplace
The turnover of labour is a critical human resource risk. It has been identified as a risk that can have an adverse impact on the stability and development of an enterprise (Wang et al., 2011, p. 187). Similar to health and safety measures, both lag and lead indicators are associated with this risk; turnover versus intent to leave and organisational commitment. Organisations must have their pulse on work-life balance as it can be perceived as a work-life conflict to employees who feel overworked and underappreciated by management.
Conclusion
In short, through this writer’s research, human resource management professionals and researchers discuss the risks and benefits of particular HRM practices or bundles of practices. Still, their primary focus remains on selling their value-adding capabilities. Unfortunately, HRM rarely discusses risk management or how appropriate ways of hiring, managing, and developing employees can enhance organisational outcomes and mitigate operational risks. In Part 2 of this series, this writer will address this underexplored environment.
The compliance landscape and the needs of employees are constantly evolving, so it is no surprise that employers find cultivating a compliant environment while meeting the needs of employees extremely challenging. Though not exhaustive, the intersection of the factors above equates to a human resources risk.
There are several risk frameworks that consider human resources risks; however, this writer selected the Community of Sponsoring Organisation (COSO) Framework. In COSO's view, human resource management (HRM) is an organisational governance technique. The objective of COSO is to increase the efficiency and effectiveness of business operations, the accuracy of financial reporting, and compliance with applicable laws and regulations. Therefore, HRM policies and practices, for example, should enable organisations to achieve organisational objectives and goals.
As an example of the importance of human resources risks, Gresa Mjaku and Abdylmenaf Bexheti in their academic paper titled: Environment control and risk assessment as COSO framework elements and their impact on entity performance: a case study in the Republic of Kosovo demonstrated that the control environment, including culture, transparency, structure, and management of human resources, had a 73% effect on entity performance.
This article (Part I of a two-part series) will identify three critical human resource risks. These risks are in no way all-inclusive.
Employee health & wellbeing
The workplace health and safety (WHS) function should be one of the most risk-based functions within HRM. In fact, the basic elements of a health and safety function involve identifying ways to monitor and manage physical and psychological risks to employees. Quantifying this risk whenever possible is an important consideration. QHS measures include but are not limited to injury and illness rates, severity and frequency of accidents and fatalities as lag indicators of safety performance. Conversely, lead indicators include employee safety control, co-worker safety response and safety culture.
Productivity
Research supports that productivity metrics are linked to the organisation's human resources. For instance, productivity can be negatively impacted without effective project management practices, while project safety and health can be compromised. Moreover, organisations must consider the issue of presenteeism (employees who come to work when they should be absent due to illness) and the potential risks this poses to the organisation. In addition, ineffective organisational change can adversely affect employee productivity, turnover, and health and wellbeing.
Turnover in the workplace
The turnover of labour is a critical human resource risk. It has been identified as a risk that can have an adverse impact on the stability and development of an enterprise (Wang et al., 2011, p. 187). Similar to health and safety measures, both lag and lead indicators are associated with this risk; turnover versus intent to leave and organisational commitment. Organisations must have their pulse on work-life balance as it can be perceived as a work-life conflict to employees who feel overworked and underappreciated by management.
Conclusion
In short, through this writer’s research, human resource management professionals and researchers discuss the risks and benefits of particular HRM practices or bundles of practices. Still, their primary focus remains on selling their value-adding capabilities. Unfortunately, HRM rarely discusses risk management or how appropriate ways of hiring, managing, and developing employees can enhance organisational outcomes and mitigate operational risks. In Part 2 of this series, this writer will address this underexplored environment.
