Understanding the Intersection of People and Risk

Understanding the Intersection of People and Risk

In 2023, attracting and retaining top talent has emerged as one of the top three risks for Australian organisations, as measured by Aon’s Global Risk Management Survey 2023. This marks a significant shift. Low unemployment rates in Australia coupled with the rapid evolution of the workplace post pandemic are key factors intensifying the focus on talent. Beyond these market conditions, deeper structural challenges are compelling organisations to evolve. Diversity, equity and inclusion (DEI) is becoming pivotal in reshaping workplaces to be more reflective of societal changes and expectations.

The Compounding Effect of Human Capital Risks

Leaders are noticing the true cost of human capital challenges and are realising that people risks intensify other top business risks. Mitigation of emerging risks such as cyber and climate rely on the ability to attract people with the skills and experience to quantify and manage these evolving issues. Talent is no longer a mere resource but a strategic differentiator that commands a new approach to workplace culture and employee engagement. For HR leaders, understanding this intersection between people and risk is indispensable.

Aligning Your People and Risk Strategies to Improve Resilience

The best practice in mitigating people risk now involves an alignment of risk and human resource strategies, ensuring that companies view their workforce considerations through the lens of enterprise risks. This integrated perspective is crucial for effective risk mitigation and driving sustainable growth. There are three main people-related risks at the forefront for most organisations.

1. People performance: engaged, healthy employees positively impact business
People performance risk relates to how your workforce directly enables your organisation to meet its strategic and commercial objectives. People performance has direct links to the Top 10 Global Risks facing organisations today, notably cyber (1), workforce shortage (8) and major project failure (9).

Companies can mitigate people performance risk by monitoring employee sentiment on a breadth of topics that impact workplace wellbeing, including employee sentiment on company leadership, work-life balance, the opportunity for career advancement, workplace culture, and diversity, equity and inclusion. Mature organisations today are shifting their focus from managing the cost ​of ‘illbeing’ to prioritising wellbeing, and those who do it well adopt a segmented approach to ensure effectiveness across a diversified workforce.

With recent changes to Work Health and Safety (WHS) legislation [1], employers are required to proactively and immediately address psychological health and safety issues in the workplace or face harsher penalties for non-compliance. To manage people risk, leaders and managers need to ensure they understand the impact of psychosocial hazards and risks and take active steps to ensure a psychologically safe workplace.

As well, according to Aon’s 2022-2023 Global Wellbeing Survey Report, company performance can be enhanced by 11% to 55% by improving overall employee wellbeing, creating a culture and climate of wellbeing, improving the performance of wellbeing initiatives, and by increasing the funding of wellbeing programs.

2. People security: the workforce as gatekeepers

Even though your workforce exposes your organisation to cyber security attacks, it is also a gatekeeper, helping you to mitigate and respond to this risk​. Many organisations are still on the journey to understanding the full scope of cyber risk they face. There are varying levels of cyber expertise across different business units within an organisation, which adds complexity for risk and people leaders.

Source: [2] World Economic Forum Global Risks Report 2022. Ch. 3 “Digital Dependencies and Cyber Vulnerabilities”

[3] 2020 Cost of Insider Threats: Global Report

It is critical that culture and workplace engagement is regarded as a vital component in an organisation’s risk mitigation strategy, in turn encouraging collaboration and information sharing between the Chief Risk Officer and Chief HR Officer and Chief Information Officer.

People: talent and reputation risk

From 1 April 2024, the Workplace Gender Equality Amendment (WGEA) legislative reforms introduce new reporting requirements for private and public sector organisations in Australia with 100 + employees. There is likely to be significant impact in terms of attracting and retaining talent. To successfully navigate this significant change, organisations should employ a well-coordinated and strategic approach that encompasses engagement, planning, and execution. Use our self-assessment tool to check your organisation’s readiness for pay transparency here.

3. Talent: the critical role of an EVP

In today’s competitive job market, the elements that were once considered exceptional benefits are now baseline expectations, or ‘hygiene factors’. Today’s leadership can find itself playing catch-up as workforces become increasingly diverse. To stay ahead companies need to  leverage data analytics to tailor their EVP for the needs of different segments within a diverse and multi-generational employee base.

Using data-driven insights can help to ensure your organisation not only meets current standards but anticipates the future needs and preferences of a complex employee demographic. For example, strong ESG values are now a core component of an organisation’s EVP and will be a point of focus for current and future employees, especially those in younger generations.

Source: [4] IBM Institute for Business Value, “Balancing Sustainability and Profitability”, 2022

Many organisations benchmark their rewards and benefits against industry standards but miss the opportunity to gain insight into what their employees truly value. The impact of an EVP needs be continually assessed and measured. This pro-active approach will enable organisations to attract and retain the talent they need to thrive in an ever-changing business environment.

People Decisions With a Data Edge

Chief HR Officers and senior HR leaders can influence decision making and drive better business results using their people data. Annual benchmarking, engagement surveys and other point-in-time assessments are valuable data points for developing a talent strategy but form only part of the greater people-risk picture. Progressive organisations are looking at developing better analytic techniques and modelling frameworks plus accessing data from a variety of sources, both internal and external to deliver actionable insights.​

By improving collaboration with risk colleagues, such as sharing data to identify priorities and agree on action plans – and having a range of people-risk related KPIs (including those related to ESG) assigned to your executive committee and board, people leaders will be able to make better decisions for sustainable business performance and quickly adapt to evolving business risks.

Talk to us about aligning your people and risk strategies.

References 

1. Work Health and Safety Amendment Bill 2023 (nsw.gov.au)
   Work Health and Safety (Managing Psychosocial Hazards at Work Code of Practice) Approval 2023 | Notifiable instruments (ACT)
   New regulations to manage risks of psychological harm | SafeWork SA
2. World Economic Forum Global Risks Report 2022. Ch. 3 “Digital Dependencies and Cyber Vulnerabilities”
3. A survey report “2020 Cost of Insider Threats: Global Report” by the Ponemon Institute revealed that  insider threats increased by 47% from 3,200 in 2018 to 4,716 in 2020. It also revealed that the cost of insider threat incidents also surged by 31% from $8.76 million in 2018 to $11.45 million in 2020.
4. IBM Institute for Business Value, “Balancing Sustainability and Profitability”, 2022 cited in CIO Insight