People risk must be more integrated: Airmic

Risk managers must work with HR and benefits professionals to address the growing threat of people risk within organisations, according to risk management body Airmic. In a new guide to managing people risk, published with Arthur D Little, Willis Towers Watson and Zurich, Airmic says people-related risks for organisations have created “unprecedented volatility”. It says new and integrated approaches are needed to address the threat, which it says is not a new risk category in itself but lies in siloes throughout the organisation. The guide maps out a new approach: “It applies a people-centred view to show how a broad range of existing risks, traditionally treated as separate and managed by different processes, can be integrated into a coherent framework.” Airmic says organisations will benefit from new insights and opportunities to control risks by using a more integrated approach; marrying the two perspectives of risk managers and HR professionals. “Risk professionals have tended to think about people risk as risk to employees, whereas HR professionals tend to view it as the risk to the organisation from human factors,” commented Julia Graham, Airmic’s deputy CEO and technical director. She said she was surprised by the lack of interaction between the two functions, adding: “Risk and HR can really support each other and enhance the strategic value of their roles.” There is a wide spectrum of people-related risks, from safety procedures to protect employees and kidnap and ransom threats, to the risk of people to the organisation, such as attracting and retaining talent and reputational threats. Airmic’s member survey for 2019 reveals many of these risks are top priorities, with loss of reputation the top threat for risk professionals at 76% and the failure to attract talent at 43%. “There is advantage to be gained from adopting a more joined-up approach and thinking about people risk as two sides of the same coin – risk to your employees and risk to your organisation from people factors,” the report notes. A number of factors are driving firms to take a more holistic approach to people risks, including changes in workforces in response to technology, regulation, political and social pressures, increasing expectations from employees and advances in risk management to include all risks within the framework. Tom Teixeira, a partner at Arthur D Little Risk Practice, said understanding people risk and integrating it with enterprise risk management is necessary to give a full picture of risk for organisations. “In most, if not all, organisations, people represent the biggest source of risk, but also implement and maintain the great majority of controls. If significant people risks sit outside the corporate risk profile, then our understanding of our risk position is incomplete.” Airmic’s step-by-step guide to adopting a people-risk perspective Consider all the areas of risk in your organisation managed by people and how these risks are addressed Identify and record the existing people-risk management processes and systems within your organisation Compare your people-risk exposure and people-risk management processes to identify any gaps Assess your people-risk management arrangements in each area against your risk management strategy, the expectations of your key stakeholders (employees, customers, counterparties, regulators and wider society) and against peers Evaluate opportunities for synergies between risk management processes, creating forums for dialogue between risk owners, shared people-risk KPIs and dashboards, and developing coordinated action plans to reduce people risks Consider initiatives to enhance recognition of people risk in your organisation Recognise people-risk processes and cross-functional interfaces within wider ERM and review Repeat the process periodically.

People risk must be more integrated: Airmic

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