What is human resource risk management, and why is it important?

Picture this: Everything’s going well at your organization. Colleagues are getting along with each other. Teams are hitting their goals. Employees feel inspired by leadership. And communication is direct and clear. 

That’s the scenario most businesses want for the workplace, but small issues with employees can often snowball into large problems if they aren’t dealt with quickly. Enter human resource risk management, which can help businesses be proactive in solving potential issues.

What is human resource risk management?

Human resource risk management identifies potential employee-related risks to your business so you can minimize any problems before they arise. If a business ensures all employees are satisfied in the workplace, this will protect the organization against possible issues. Not mitigating employee-related risk can negatively impact revenue, reputation, profitability, and other aspects of the business.

The role of a human resource risk management professional is to consider all of the possible outcomes of employee risks, which can be related to employee behavior, management styles, or salaries, for example. 

Risk management figures out the scenarios most likely to occur and the potential outcomes of those situations. Where possible, human resource risk management specialists look for ways to reduce risky situations. For example, if HR receives a complaint from an employee about their manager’s temper, they may need to step in and work with the manager on anger management tactics.

Common risks HR managers should recognize

Implementing human resource risk management into your business can be daunting if you don’t know what you’re looking for. Here are a few common scenarios HR managers should have on their radar:

• Software security breaches and the release of confidential employee information
• Employees working more than their agreed-upon hours
• Employees being paid less than their equals
• Employees not receiving accommodations granted by law
• Missing or incomplete background or reference checks for new hires
• Employee injuries due to lack of training or education
• Employees feeling like they can’t be honest about potential work issues

Ways to reduce risk in the workplace

Follow these tips to reduce the number of potential employee-related issues in your organization:

• Develop a recruitment and hiring plan. Hiring new employees in a rush can lead to problems down the line. It’s best to plan for your hiring needs so you can take the time to properly vet all candidates. Missing a reference check could be damaging and costly to the business.
• Read up on industry and government compliance regulations. Be aware of labor laws, workplace safety rules, privacy laws, and industry norms. Ensure your organization’s policies reflect these regulations. 
• Follow the latest legal guidelines. It’s important to stay up to date on legal employment issues, especially regarding family leave, medical leave, and ADA compliance. If your organization has employees in multiple locations, be aware that laws can differ from place to place.
• Provide proper onboarding and training. Establish a detailed program to prepare new employees at all levels to work effectively and safely at your organization. Carefully track onboarding and training requirements to ensure all employees complete them. 
• Create a welcoming culture. Develop an organizational culture that encourages employees to ask for help. This way, those struggling with work or personal issues are aware of the resources they can use, so they don’t feel ignored or alone. This can reduce potential dissatisfaction with leadership.

Human resource risk management protects both employees and employers. Be sure to investigate potential areas where your organization may be at risk and implement strategies to minimize likely issues before they occur.

Want the full rundown on the topic? Check out the complete guide we created on human resource management.