Why HR Risk Management is Key to Any Successful Business

The common saying is that only two things are certain in life: death and taxes. As HR professionals, we'd like to add a third thing to that list: risk. 

Managing Human Resources is a job like no other; people are unique and unpredictable, and there will always be risk involved in the workforce. As HR pros, it's down to us to manage and mitigate this risk with careful strategies to ensure that the workplace continues running smoothly. 

Yet, as we all know from experience, HR teams are often overburdened and underfunded. An average day for even the best HRs often includes large amounts of admin, chasing people, and patiently supporting employees with procedures they could definitely do on their own. HR thus becomes a reactive, responsive practice rather than a forward-thinking and proactive one. 

So, in addition to the mountains of other tasks and responsibilities that the hard-working HR pro needs to undertake, why does the often-overlooked practice of risk management need to take the lead? Furthermore, how can HR ensure that the management of risk receives the attention it deserves from busy HR managers? In this article, we'll take a closer look at the importance of risk management in HR and how you can use it to take your HR department and business to the next level. 

What is risk management?

In HR, risk management refers to anticipating and preparing for potential issues that could arise in relation to an organisation's workforce. These employee-related problem scenarios can be anything from general people problems (low employee engagement, conflict between employees, burnout, poor employee conduct, etc.) to data privacy, workplace safety, hiring and retention issues, compliance, legal action, and more. 

Since the onset of the Covid-19 pandemic, risk management has become especially important, with HR having to carry out risk assessments and create new strategies around social distancing, sick leave, and remote working. Now, the so-called great resignation and growing fears of a recession are bringing a new selection of risks that HR needs to face. 

While it's impossible for Human Resources to ever completely eliminate risks related to employees, risk management focuses on working preventatively to anticipate problems and nip them in the bud. This means finding strategies to deal with all your people-related risks in order to protect both employees themselves and the wider business success.  

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Why is risk management important?

A business is nothing without its people. It doesn't matter how impressive your organisation's products, mission, or performance is; if issues arise among the workforce, reverberations will be felt throughout the whole business. And, often, these issues are not identified until far too late, leading to major knock-on effects. 

HR's job is to keep the people side of the organisation running smoothly and effectively, and creating a risk management strategy is a key part of this. Risk management seeks to protect both employees and employers through the proactive mitigation of potential risks that are likely to arise. 

Here are some of the benefits of an effective risk management strategy: 

Increase productivity

Providing a safe, compliant, and positive work environment is essential for allowing employees to thrive. With a proactive risk management strategy, HR teams can identify any potential issues early on, such as a poorly trained line manager whose conduct is damaging the morale of their team, a high level of pressure and overtime that is leading to increasing sickness rates, or even a brewing conflict between individuals that might harm a team's efforts. By stepping in early, HR can start managing these risks to create a better and safer work environment for everyone.  

Keep costs down

One of the biggest benefits of risk management is avoiding unexpected expenses. Whether it's an unforeseen fine for not complying with local labour or data regulations, or simply the cost of hiring and training new employees to replace outgoing staff as a result of a workplace conflict or bad work environment, issues like these can be expensive. A focus on risk management allows HR teams to combine risk assessments with a cost-benefit analysis in order to take informed and cost-effective action. 

Preserve the organisation's reputation

Risk management is also essential for protecting your organisation's brand reputation. Data and cybersecurity breach? Disgruntled former employee bringing a lawsuit for unfair dismissal? Negative publicity due to a workplace incident that went viral on Twitter? As HRs, you're probably far more concerned with internal comms than PR, but nonetheless a powerful HR risk management strategy holds the key to nipping potential risk events in the bud before they reach the public.

How can HR make risk management more effective?

'How can my overworked team start mitigating tomorrow's potential risks when we barely have time to do all of today's work?' we hear you ask.

It's a good question -- we know how it feels to be the overwhelmed HR pro who is so busy putting out fires that working on strategies such as risk management seem impossible. 

But, don't worry, here are some ways that you can bring risk management to the forefront of your HR strategy. 

Unlock HR's strategic role by cutting out admin

According to one survey, HR currently spends a fifth of its time on administrative tasks, a concerning statistic that reflects an out-of-date approach to Human Resources. While in the past HR may have had a mostly administrative role, the high-powered HR department of the 21st century can boast more strategic value. 

To facilitate a proactive and strategic approach to risk management, HR teams need to free up this time spent on admin that adds little value and can easily be eliminated. To do this, HR technology is essential. Using XCD's Salesforce based HR software, HR executives can easily automate their most time-consuming workflows. Everything from expense calculations to time-off approvals and performance review notifications can easily be automated using the powerful software, freeing up HR staff to focus on their more strategic work. 

Incorporating self-service technology into your HR offering is another way to reduce the administrative workload, encouraging employees to take ownership of their HR processes such as updating employee information or viewing their remaining paid leave allowance. Removing the need for HR executives to reply to endless emails and chase answers, self-service HR portals can be a game-changer for HR's strategic potential. 

Overall, by taking the administrative load off HR's shoulders, a high quality HR software frees up the time for the risk management process. Want to learn more? Read about how HR software saves teams thousands of hours each year on time and expenses alone

Make the most of your data

When carrying out risk assessments and planning strategies to mitigate risk, having accessible and up-to-date data is essential. Without tracking the right metrics, how are HRs supposed to identify concerning trends of absenteeism or performance, assess the health of the organisation's turnover levels, or predict the likelihood of a future talent problem? 

Knowledge is power, and with XCD's feature-rich reporting and analytics suite Human Resources teams can create a data-driven risk management process. With 150 pre-made report templates as well as custom reports and predictive analytics, our HR software supplies you with the data you need to anticipate potential risk and start mitigation. 

Let's take the example of the Covid-19 pandemic, which led to high levels of uncertainty for HR -- research found that 87% of HR pros struggled to analyse and predict the impact of the pandemic on their workplace. Using data to illuminate the risk management process, XCD created a custom reporting dashboard with everything we needed for a better risk management framework during the uncertain time. 

Using the Covid-19 dashboard, data helped us identify the most at-risk people in an organisation, the cost of furloughing people, the amount of sickness that would lead to operations becoming unsustainable, and much more. This information was crucial for HR teams tasked with risk management during the pandemic and demonstrates the importance of a data-led approach to risk management. 

To learn more about how the custom Covid-19 dashboard supported risk management, read our full blog here

Simplify compliance and data security using HR software

Another way that HR can manage risk and liability more effectively is by using tools that automate security and compliance effortlessly. For example, XCD's HR and Payroll solution is fully GDPR and HMRC compliant, automatically ensuring that all data is treated effectively with a full audit trail of all pay elements

By using a comprehensive single HR and Payroll solution such as XCD, you can eliminate the need to transfer information between systems which can pose a privacy and security risk, instead holding all employee data in a single secure solution where only those with the necessary custom permissions can access and edit it. 

You may be interested in: Why XCD's single solution HR and Payroll?

Managing HR risks with XCD software

The management of risk is essential in any successful business, allowing HR to safeguard both employees and employers to ultimately create a more resilient organisation.

Although risk management often poses a problem for reactive, admin-focused HR teams, XCD's HR and Payroll solution unshackles HR teams from their non-strategic administrative tasks. This allows HR pros to focus on creating robust and proactive HR strategies for the mitigation of all sorts of people risks. 

Want to see for yourself? Book a demo of our powerful cloud-based software today to find out how XCD can take your risk management process to the next level. 

 

 

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