Industry News

Hard times require managing HR risks

An Article By Lydell C. Bridgeford, October 28, 2008, Employee Benefit News

Some organizations tend to pigeonhole human resource problems into a talent management box, thus overlooking other HR risks that may negatively affect a company's performance, states a new report by Ernst & Young, LLP.

Besides people issues, HR risks can entail an employer having a poorly designed training and succession programs, not aligning pay with performance and inadequately managing vendors - all of which can cut into a company's bottom line.

"By proactively addressing these areas, the C-suite, as well as those in HR and finance, can drive sustainable, positive business results. But if not managed properly, these issues may cause significant damage," says Bill Leisy, the Americas markets and services leader at EY.

The consulting firm questioned over 150 executives from corporations with a global presence. In the report,"2008 Global HR risk,"EY explains that 43% of respondents say their board of directors never officially reviews the company's HR risk profiles or only do so on an ad hoc basis. Yet 34% of executives admit that traditional corporate risk issues are formally examined at least on a quarterly basis, and 14% say they are never or only reviewed on an ad hoc basis.

Other key findings from the survey include:

▪ Less than half (42%) of companies validate and prioritize their HR risk profile;

▪ Only 43% analyze HR risk coverage by business unit and develop, monitor and enhance their plans;

▪ Nearly half (46%) validate their HR risk profile with executive management and an audit committee; and

▪ Slightly more than half (56%) of the respondents say they identify and document the likelihood and impact of HR risks to the organization.

"We are now seeing organizations shift their focus to managing areas of risk that come with an opportunity to make the business better," says Leisy. "Improved reporting and disclosure structures, cost reduction of operations and compliance, talent management, pay and performance alignment, and the tone at the top are among those areas that are starting to get the attention they deserve," he adds.