People issues a big risk

by 07 Aug 2007

HUMAN CAPITAL risks, such as skills shortages, succession planning and the loss of key personnel are the biggest threats to businesses, while issues surrounding climate change were the most ineffectively managed, a KPMG report has found.

While businesses consider they are handling credit, market and financial risk well, confidence is lower in addressing human capital, terrorism and climate change issues.

More than 50 per cent of respondents identified the importance of the skills issue, but only 32 per cent said they managed these risks effectively.

There appeared to be a disconnection between rhetoric and action around skills shortages, according to George Sutton, partner in KPMG’s risk advisory services.

“Just as the skills shortage has shown, the danger of inactivity in this space is very real and needs attention now,” he said.

There are a couple of key issues for HR professionals, Sutton said. One of the main challenges is embedding a successful risk management culture within an organisation.

“Getting the risk culture right is important. So it’s important that you communicate that risk culture to new recruits as well as having HR professionals understand what you’re actually looking for in these people and the values they should have, so HR can act as a filter at the recruitment stage” Sutton said.

While HR directors have not traditionally worked with chief risk officers, Sutton said this is more prevalent when discussing issues such as staff turnover, for instance. “That’s a measure that even we look at very closely,” he said.

“It’s now become clear that high staff turnover equals extra cost in the business, while low staff turnover is actually adding economic value to the business. It is a very tangible saving if you can manage your staff turnover down.”

The first step to getting HR involved in risk management is getting communication between the risk group and the HR department going, Sutton said.

“So it’s really important for them to sit down together, work out the current state of affairs with regards to risks and what sort of red flags they’re seeing, and then work out what key risk indicators they’re going to monitor on an ongoing basis.”


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