HR and Risk Management

How often do you collaborate with your risk-management counterparts at your organization? You should be doing so on a regular basis, according to Lowers Risk Group, a consulting firm with about 1,000 global clients. We’ve covered the issue of risk and human capital before, including this byline and this cover story. Now, a new whitepaper from Lowers highlights what it believes are key trends “driving the expanding role of human resources in enterprise risk management.”

Vince Pascarella, who has an SPHR and is vice president of Lowers Risk Group, has this to say:

Executives tend to rank human capital very high in terms of the potential impact on business results — often ahead of financial risks — but few believethey are managing human capital risk effectively. Most risks begin and end with people, so it’s not surprising to find that human resources is increasingly being called to the table to help mitigate risk.”

The whitepaper is free but requires registration, so I’ll summarize some of the key points and then you can decide whether to delve deeper. First, it cites a Deloitte report that finds a number of trends are leading to a greater focus on human capital risk management: “Black swans,” or low-probability events that have far-reaching impact (including the Euro crisis, the Gulf of Mexico oil spill, the tsunami in Japan, the Middle East uprisings) and “people risks” such as fraud, theft and security breaches that end up making headlines. The view of what constitutes human capital risks is expanding, the whitepaper notes, and now includes four “manageable areas of HCM”:

1. regulatory compliance

2. position risk level

3. management risk tolerance levels, and

4. onboarding issues “that may allow individuals to fall through the cracks.”

This new awareness of risk is, according to the whitepaper, leading HR to collaborate more closely with their risk-management brethren and create a “risk mindset” for day-to-day HR activities. HR must also “make the most of its existing data” to help identify potential risks.

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