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 , 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.