What are your company's weak points?

Many of the reasons why businesses under-perform or fail are people-related, such as employee absence and lack of commitment. Problems can also occur where succession planning has been ineffective and poor people management is reflected in the bottom line. A risk management process can help highlight these issues and identify those that are fundamental to the long-term health of an organisation.

But research shows that there is currently a significant gap between the risks many organisations believe they are running and the action they take to manage them. Evidence from surveys of senior executives suggests that one of the key risk areas that is not being adequately addressed is the way people are managed.

The increased requirement for organisations to comply with employment and other legislation has helped push the issue of managing risk up the agenda. But it is important to emphasise the proactive elements of the risk management agenda rather than just the defensive, compliance or box-ticking parts if it is to add real business value.

Some of the additional people management risks identified in the CIPD’s report Risk and performance: HR’s role in managing risk include the following:

Non-compliance with legislation can have a negative impact on an organisation’s reputation
Lack of attention to diversity aggravates recruitment difficulties
Failure to link the business and HR strategies can lead to under-achievement and employee demotivation

Once the risks have been identified, it is important to involve people management experts further to help develop appropriate policies or actions to prevent or offset any negative impact on the business. One example of effective action might be developing communications, conducting employee attitude surveys and introducing cultural change initiatives to improve employee engagement.

People management and development professionals involved in the risk management process can help organisations control people-related costs and take opportunities to improve service delivery. They have the skills and knowledge to identify the risks associated with people and can help gather the evidence necessary to strike a balance between the resources required and the benefits to the business.

But managing risk is not just about limiting short-term financial loss, it’s about addressing all those issues that can impact on organisational outcomes. Organisations need to actively involve their people management and development professionals in the risk management process from the outset to ensure they are prepared to deal with such risks.

The range of external events that may cause serious and sudden disturbance to the operations of organisations is wide: IT failures, severe weather, disruption of fuel supplies, fire or terrorist activity, for example.

But it's not just the organisation whose future wellbeing is at stake; it is the people. The bomb attacks in London in July 2005 and the recent scares at Heathrow were a reminder that plans need to deal effectively with the people management aspects of emergencies too. Even where such plans are in place, they may not have been tested in practice and staff may be unfamiliar with them. This is another opportunity for people management professionals to become more actively involved in managing risk.

More proactive input is needed at the front end of a crisis so that the organisation has taken on board the people dimension and is fully prepared to respond should the worst happen. Only then will businesses reach their full potential.

Source: CIPD