Future Focus

You, the Risk Manager

By Jennifer Schramm Jan 1, 2011

January Cover

In a volatile economy, change is constant. And with change comes risk. Events such as Wall Street’s bank bailout, the Gulf oil spill and countless product recalls support the idea that even the most complex risk management models may fail if they do not sufficiently take into account the role of human behavior and organizational culture. Therefore, HR executives’ leadership in developing and supporting distinctive and effective company cultures puts them at the center of new risk management strategies.

Indeed, HR leaders are becoming more involved in risk management in a number of ways, according to an August 2010 report, Managing the People Dimension of Risk, by the Corporate Research Forum in London.

One way HR leaders are involved is by shaping policies and procedures that directly impact the way employees approach and complete everyday work tasks. Look at the growing use of checklists, particularly in the health and safety fields. Pilots have used checklists for years, but now other professionals rely on them to manage risk.

Malcolm Gladwell, an author and staff writer for The New Yorker magazine, describes Dr. Atul Gawande’s work on the efficacy of checklists to reduce mistakes and mitigate risk. In a review of Gawande’s The Checklist Manifesto (Henry Holt & Co., 2009), Gladwell says Gawande identifies “a problem that afflicts virtually every aspect of the modern world—and that is how professionals deal with the increasing complexity of their responsibilities.”

Intervention into the ways employees approach tasks will be central to HR leaders’ responsibilities as the function grows more involved in risk management.

A second critical area of risk management for HR professionals involves their roles advising senior executives on legal compliance and ethics. HR professionals’ knowledge of legal and management issues, as well as their routine interaction with employees, puts them in a position where they can point out risks other executives are unaware of. Furthermore, some of the worst of the nation’s recent crises are tied to the behaviors of high-ranking executives or board members. To prevent similar scenarios in the future, HR executives must help build safeguards into board and executive management processes.

Third, HR professionals have become primary holders of employee and workplace data. They must understand how to use company data to identify risk and act as stewards of sensitive information. In the past, the data for risk management analyses were often quantitative, involving relatively straightforward collection processes. Today, the emphasis on the human element in risk management calls for qualitative approaches that may be more time-consuming and that may require skills in collecting and interpreting data. HR professionals will need to understand how to leverage the information they possess to moderate risk and make the case for investments in areas where they uncover vulnerabilities.

Most HR leaders still have a way to go when it comes to integrating risk management into the people aspects of their businesses. But with the costs of disregarding these human factors growing, few HR professionals can afford to take that risk.

The author is manager of the Workplace Trends and Forecasting program at SHRM.

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