HR issues a key risk for business

by 13 May 2008

WHILE BRAND AND image are the key risk concerns for corporate Australia, HR issues such as attraction and retention of staff, succession planning, workplace safety, absenteeism and industrial disputes are high on the list.

A recent study forum that, indirectly, HR concerns also factored in risks to brand and image, through issues such as compliance breaches, product quality, ethics, and social responsibility and community relations.

Concern about HR risk was greatest among companies with revenues up to $100 million, and this was driven primarily by the war for talent and the difficulty in competing with the workplace flexibility, benefits and training available from larger organisations.

HR risk was also the dominant risk issue for not-for-profit organisations, and a noteworthy risk for the construction sector.

“The mining sector boom is placing significant stress on organisations seeking to attract and retain skilled labour,” said Dean Akerley, national practice leader for the mining sector at Aon, which conducted the report.

“The attractiveness of work on major projects and the compensation benefits available have created a transient workforce.

This, in turn, can introduce a new set of risks and add enormously to the development costs of any project and/or contribute to a delay in completion if there is a mass movement of skilled labour from one project to another.”

The report also found that professional service organisations are primarily concerned with the loss of intellectual property, which in part is driven by the tight labour market and the movement of key staff.

Tim Dwyer, head of people risk solutions for Aon, said that multinational corporations are constantly confronting new challenges as they seek to globalise and expand, not the least of which is dealing with an increasingly diverse and internationally mobile workforce.

“Today we see companies taking a much more active role in the way they manage and support a global workforce,” said Dwyer. “This is particularly true with employee benefits where the company may face significant financial, legal and human capital risks.”

Ross Castle, national manager of client research & development for Aon, said the fact that brand and image is the top risk concern is a salutary reminder that an organisation’s hard-won reputation can be quickly damaged by an unexpected event at any level in the business.

“Risk is clearly a strategic issue, with 70 per cent of organisations formulating risk policy at board or board committee level,” Castle said.

However, there were some worrying inconsistencies in how organisations approach risk management, he added.

The report found that a majority of organisations rely on an executive or senior management group identifying risks in their business.

Further, risk management was centred on knowing and understanding what level of risk an organisation was willing to assume, yet only 44 per cent of firms undertook any form of risk tolerance assessment.

“Contrast these issues with organisations that foster a culture where everyone is a risk manager and feels a sense of ownership about identifying and responding appropriately to risks,” Castle said.

“Australian businesses show improved corporate governance standards, better internal controls and more informed decision making which are key benefits from investing in risk management.”

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