The growing importance of managing people risk

Employees have always been the backbone of any organisation and people risk has been growing in importance for risk managers who are increasingly working with HR to manage and mitigate the risks. People risk is a broad term and Mercer’s 2022 People Risk survey identified five pillars of people risk that are having the greatest impact on businesses across the globe – health & safety; governance & financial; accelerated digitisation; talent practices; and environmental & social. The report notes that the highest of all of those risk pillars, and the one identified by 87% of the HR and risk professionals surveyed in the report as the most serious threat to their business, was the health and safety of employees. “Not only are HR and risk professionals both worried about the ongoing risks of communicable diseases, they are also worried about personal crises (including catastrophic personal life events) that have a profound impact on the well-being of employees,” says Nick McMenemy, partner & digital, strategy & markets leader, Mercer Marsh Benefits UK. “The increasing strain on people’s mental health further exacerbates this concern – a problem highlighted by Mercer’s recent Global Talent Trends report, which found that 81% of employees report feeling at risk of burnout, a huge jump from 63% in 2019.” As a result, says McMenemy, the increasing cost of health, risk protection and well-being benefits is a top-ten people risk priority for businesses across the globe. With all the talk of people risk and workforce risk, what exactly is the risk manager’s role? McMenemy says people risks are the business risks related to a workforce, and that how a business attracts, manages, equips, motivates and retains this most critical type of asset determines the associated risks. “Those can range from meeting ESG targets to managing business planning and attracting the right skills for the future. Risk managers should be working closely with HR managers to mitigate every one of the top people risks they identify within their organisation,” he says. In the past, there were some barriers to the risk management and HR departments working closely together, with each taking a silo approach. “Perhaps in the past a risk manager’s role may have had closer links to operations than it necessarily did with human resources, but as our research demonstrates, this approach has changed. HR and risk managers now work in tandem on people risks,” says McMenemy. He points to cyber risks, and says Mercer research shows that globally, less than one in two (44%) businesses have effective cybersecurity policies, controls and support systems (such as multi-factor authentication, vendor management or encryption of data) in place. “Yet, our research also shows that cyber risk is also a significant people risk. More than nine out of ten (95%) cybersecurity issues trace directly back to human error. These data points highlight the extent to which employees struggle to keep up with change in this area,” he notes. Health and safety In terms of mitigating some of the key people risks, McMenemy provides some suggestions when it comes to health and safety, the top people risk HR and risk professionals identified in Mercer’s research: Review workplace and job risk factors alongside employee health data, to understand where the greatest health risks lie. Take stock of current access to employee support programmes (including grassroots efforts) and data on workforce needs to identify any gaps in provision. Engage business leaders to discuss how work impacts on employee and organisational health. Then define strategies to mitigate risks. Create strategic well-being programmes by getting buy-in and funding to build multi-year health strategies that target specific risks. Set minimum standards for basic, high-value medical coverage. This should include preventive, mental health and cancer care. Another area is travel risk management, and McMenemy explains that there are risks associated with travel and mobility specifically, though they have a lower degree of severity and lower likelihood of occurring when compared to other risks. He adds: “Where risk managers need to focus their attention is on the inter-related risks of travel that fall into areas like health and safety, cyber-risk and other areas.” There are also potential risks around diversity, equity and inclusion, an area that is growing in importance. Mercer’s survey found that two in five (40%) organisations globally have effective, clear, transparent and measurable plans to advance diversity, equity and inclusion. A similar number of organisations (42%) report effective policies to ensure a minimum standard of employee benefits for all employees, regardless of role or location. “The question we need to ask is: are companies viewing diversity, equity and inclusion as an opportunity and not a risk?” says McMenemy. Changing employee behaviour The difficulty of changing employee behaviour is seen as the top barrier to addressing people risk, though this really is a case that ‘no one size fits all’, says McMenemy. “We are in a new workforce era where employees want to feel supported as individuals under a collective culture. Post-pandemic, employees are focusing more on the purpose and impact of their employment, making them look at their employers with a more critical lens,” he says. “For example, in the past, flexible benefit plans centred on different life stages. However, when you use data and employee engagement insights to define benefits, you reach true personalisation. To get employees the benefits they value most highly, put the choice in their hands so they can create a selection of flexible benefits tailored to their unique needs. By introducing benefits based on what an individual needs, instead of just what the majority wants, you can also boost diversity and inclusion,” he adds. In many ways, employee benefits are more important than ever as a result of the ‘talent gap’ and the ‘great resignation’. The Mercer survey highlights that the changing nature of work is now the fifth biggest people risk globally, and McMenemy says that while traditionally viewed as exclusively an HR concern, talent attraction and retention is now not only firmly on the risk agenda, but also a key C-suite focus. The survey found that almost 45% of HR and risk managers think their employee value proposition needs improving (or do not know how effective it is). “Risk managers and HR managers have a duty to understand what current and future employees value most and put in place policies to support new ways of working. Otherwise, they risk losing valuable skills, says McMenemy.

The growing importance of managing people risk

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