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A Complete Guide to HR Risk Management

Updated: Mar 21, 2023

Do you want to improve the way you manage your employees while keeping employee satisfaction up?

Or are you looking for a way to protect yourself from some of the many issues that can hurt your business?

Whichever of these it is, the answer is simple: you need HR risk management.

If you’ve never heard of it before or are uncertain what it entails, you’re on the right page. Today, we’ll go over what it is and how it can help you fight a lot of business problems.

You’ll also get the basics of how to implement it as we discuss common HR risks, so you can get started on planning your own HR risk management.

What is HR Risk Management?

There are many ways to describe HR risk management. We can put it this way: it’s the process of looking for potential HR risks and finding the best solution to handle or prevent them even before these risks eventuate.

In other words, it’s looking out for potential HR problems and addressing them before they become problems.

The focus for this type of risk management is usually the employees. This can be related to the way they’re managed, how they behave, how much they can access in their roles, or even how you hire and let go of employees.

For example, some risks that may arise are internal theft, benefits liabilities, employee-related lawsuits, and workers’ comp. We’ll talk about them in more detail later, but these give you an idea of what risks HR risk management addresses.

The risks faced often depend on the nature of the business and its structure. For instance, SMB HR risks are usually slightly different from those faced by bigger organisations.

What’s more, note that all employees are included in the risk assessment: it doesn’t matter whether you’re in the C-suite or a part-timer.

Why is it important?

HR risk management is vital because it ensures that your company is ready for potential issues that would otherwise hamper it if they do arise.

Remember: businesses are powered by people. Employees make your business possible and are critical in achieving your aims and success.

Without the right employees to power your organisation, you’d be unlikely to get anywhere.

An HR risk management plan helps you with that. Among other things, it does the following:

  • Mitigates the risks of taking on employees who may cause trouble

  • Make better hiring decisions

  • Manage your human resources as effectively as possible

This gives you an idea of the value HR risk management brings to the table. And you wouldn’t be alone in seeing that value: it’s why we’re seeing a surge in popularity for HR systems in Singapore that have risk management tools in them.

Most of the best HR software is actually designed specifically around risk management strategies now. As such, more and more companies are integrating risk management into their organisations as they modernise.

Of course, you don’t technically need HR software to do risk management. However, modern utilities do make it much easier, especially as certain tasks and can be automated with software now.

Common HR Risks to Address in Risk Management

Now that you know what risk management is, let’s talk about some of the most common HR risks and how to deal with them.

Again, remember what we said about risks depending on companies’ structures, natures, and unique needs.

This means that your organisation may require unique strategies for certain risks - ones that we can’t provide for in this generalised guide.

Even if the recommendations here aren’t exhaustive, though, they can still give you a sense of what to do and how to address the risks discussed.

1. Taxes, Regulations, and Compliance

Most HR personnel already know that there can be a lot of legalese involved in their jobs. There are laws and regulations to look out for.

Think of employment regulations, payroll requirements, and the like. Companies need to comply with a lot of legislation.

The straightforward solution here is for your HR personnel to audit the relevant departments and processes regularly for compliance.

This can be a lot of tedious work, granted, but it’s worth it to prevent costly fines from errors or oversights. Fortunately, as we mentioned earlier, there’s HR software now that can help you with it, like ones that do automated tax calculations and filing for payroll regulation compliance.

2. Legislative Changes

Laws change more often than people think. Even laws affecting employees, like ones on disability inclusions, can be altered at any time.

Updates to legislation have to be tracked and observed by your HR team. Again, it’s about minimising the possibility of getting slapped with a non-compliance penalty or fine.

An easy fix is to make sure your HR team has news alerts set up for the appropriate topics and agencies, like the organisations that usually announce such legislative changes.

3. Technological Security Concerns

Well, we all know digitalisation has been sped up by the pandemic. What this means, though, is that businesses now have bigger responsibilities than ever before when it comes to data security.

The solution here is to ask your IT team to provide suggestions on security. Ask them to help your HR team disseminate good operating procedures across all personnel.

4. Recruitment Woes

This is one of the most common concerns for HR in all organisations. There are so many risks that come with recruitment, like hiring people with a history of legal issues or not hiring enough people for the business’s needs.

All of these can be resolved with a strong hiring system. The goal is to mitigate those risks we mentioned, which means having clear processes for background checking, standardised requirements, and so on.

5. Onboarding Processes

Onboarding and training are other common pain points. A lot of organisations don’t realise that they’re having trouble getting employees to adapt to their roles simply because of their faulty onboarding processes.

A good solution here is to survey or interview your current employees. Ask for feedback and opinions. Ask them to tell you what issues they had or what solutions they propose.

All of this can help you formulate a better onboarding process for new staff.

6. Leadership Quality

Leadership is crucial in an organisation. Without the right managers, even good employees can underperform or even leave your business.

There are several obvious solutions here. The first one is to provide managerial training.

Training leadership should actually be par for the course in most businesses, as far as we’re concerned. Everyone can improve on his skills in some way, and it only makes sense to invest in improving your leaders’ abilities.

The reason businesses skip this so often is that they make the mistake of assuming managers always know how to do their jobs instantly.

But new situations and challenges can arise. That’s why it’s important to make sure your managers are ready for them with the right training.

During your training, you should also implement the second clear solution: to ensure that managers know they’re ambassadors of company culture.

“Do as I do” applies here. Managers should display all the traits and values that they want employees to have.

Hence, for instance, you should make sure that managers understand that they need to treat their subordinates with respect. Otherwise, the latter will never do the same for managers and each other.

7. Employee Development and Progress

You know how some people say they’re leaving a company for growth? It’s usually because the company lacks employee development.

HR can help here by formulating development and training programmes. Such programmes can not only improve your employees’ skills (which means better productivity!) but also help you keep good employees happy.

Note that your HR team can actually send employees on training courses they’re interested in and that are relevant to their jobs. Alternatively, you can set up training within the organisation itself.

8. Termination Processes

The way you retrench employees is as important as the way you hire them. There are things to consider here, like legalities and your company’s reputation - you don’t want to get a lawsuit or gain notoriety as a bad employer!

The solution here is to have HR create dismissal policies that comply with current laws and keep it updated. At the same time, the policies should account for the company’s image by avoiding practices that may be viewed as unsympathetic, impersonal, and so on.

A Last Word on HR Risk Management

As you can see, HR risk management is not only vital for organisations today but also more than feasible!

Even if there are many risks to address, there are also many solutions for them, so no one should put off developing an HR risk management strategy simply out of the sense that it will overwhelm them.

Ultimately, HR risk management is about making sure your people are treated the way they deserve and in a way that ensures your business continues to prosper. Seen this way, it’s pretty much a requirement for any modern organisation.

If you want to learn more about HR risk management, what tools to use for it (like HR risk management software), and more, drop us a line! We’ll get back to you as soon as we’re able.


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