HR organisations need to prioritise people-related risk says Deloitte


6 August 2012: With low-probability events that have a far-reaching global impact (black swan events) on the increase, people-related risk is shaping up to be one of the key trends in Human Resources (HR) according to professional services firm Deloitte. HR functions now need to adjust their own priorities as people risk rises on the corporate agenda.

In the global report   “Humans Capital trends 2012: Leap ahead”,  Deloitte highlights how  forward-thinking HR functions are partnering with core risk functions such as Risk, Legal and Internal Audit, to identify, prioritise and monitor people-related risks.

Nicky Wakefield, Deloitte Consulting’s National Leader of Human Capital, believes Australian leaders should be better leveraging their HR Partners to help manage their key people related risks more effectively.

“Leading organisations are increasingly engaging their HR leaders to help them manage risks across the entire spectrum of risk-related activities, from strategy and planning to operations and compliance.

“This involves Chief Human Resource Officers (CHROs) joining risk committees and ensuring people related risks are a recurring agenda item at executive and board meetings.

“HR leaders need to include formal risk management and benchmarking into a business’s processes and strategies, in order to provide a broader and more informed view of people-related risks,” said Ms Wakefield.

The report identified nine practical implications that HR functions can now adopt in order to be able to adjust their own priorities.

  1. Take the lead on managing human capital risks. This requires a team within HR to focus on human capital risks throughout the business.
  2. Change how HR works with the business. This helps HR identify people risks before they actually become a problem.
  3. Preparing for broad risk discussions. CHROs should be now preparing themselves to speak with authority on both people risks and HR functional risks.
  4. Collaborating with the Risk Management function. HR functions are engaging proactively with the risk management team so details of HR systems and processes are understood.
  5. Creating a risk mind-set for day-to-day HR activities. Leading organisations are ensuring HR and risk management work together to create a single set of practical and risk intelligent processes.
  6. Making the most of existing data. Using advanced analytics and data to help a company manage risk more effectively.
  7. Understanding the risk impact of HR changes. Organisations are recognising that HR changes can affect the risk profile of an entire organisation.
  8. Recognising the importance of aligned incentive compensation programs. HR leaders now need to understand and articulate the link between incentive compensation and risk.
  9. Helping to transform risk management. To manage risk effectively close alignment is needed between HR and risk management programs.

“In the new world of interconnectedness, this is an opportunity for CHROs, who are under the risk spotlight, to demonstrate their value. It is the HR leaders who embrace the critical role that people play in avoiding and managing risk, who will shine,” added Ms Wakefield.

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