NZ firms concerned over people risk

by 10 Jul 2007

New Zealandcompanies see human capital as their biggest risk, according to research.

A study by Senate Communications Counsel and TNS Global found that NZ executives believe human capital risks are the most serious facing their organizations, above reputation risks, IT networking risks and regulation. Conversely, terrorism was seen as a major threat by just 2 per cent of respondents.

The NZ findings back a number of Australian and global studies suggesting people risk is seen as a serious threat. Insurance broker Aon’s annual study of risk management trends found that human capital risk is now the third largest risk concern, its highest rating since the study began. Fellow broker Marsh, meanwhile, reported recently that loss of key staff is among the top three risks facing its clients. Only competitive pressure was seen as bigger risk.

The Senate research also found that NZ executives see human capital issues as making up a minor part of organisational reputation. Just 9 per cent of those polled believed that general public perception of how employees are treated by their organisations influences the quality of reputation. That’s despite the experience of NZ firm Progressive Enterprises, which was the subject of intense media vilification over its handling of employee wage bargaining.

The company – a subsidiary of Woolworths –became locked in an industrial spat with two unions over increased pay demands. After distribution centre workers went on strike over the dispute, the company locked them out indefinitely, blaming the union’s demands. Soon, TV coverage began running stories about empty shelves in the firm’s supermarkets and reports also circulated that the company was paying more than three times the normal amount for distribution during the lockout.

Corporate and workplace culture is increasingly being linked to reputation. For example, the 2004 rogue trading incident at National Australia Bank – in which the firm lost $360 million – was exacerbated by the culture in the bank’s trading operations, according to investigations that followed.

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