The business world has been rocked over the past few months by the
escalating number of corporate scandals. While these are hugely significant,
I’m not certain that even the very best HR people could have intervened to stop
them happening. If managing directors and senior finance directors have been
powerless to stop them (or even complicit in some cases), it is a tough call to
expect HR directors to intervene.
But there are other issues at work which demand our attention when it comes
to risk management. There are many inherent risks within the core of what
businesses do regarding their people – recruitment, management development and
succession, feedback processes, the implementation of new compensation systems
or the introduction of wide-scale health and safety policies. Get these wrong
and although they will probably not end up in the newspapers, they will
seriously damage the work-place and the bottom line.
Managing risk is not a negative exercise involving remedial action after the
event. There is a big prize at stake for HR, and it involves taking a
proactive, strategic view of managing the risks associated with big, complex
Without wanting to sound alarmist, there is risk everywhere. It is inherent
in the pursuit of the business plan and in the choice of strategic options. There
are dangers associated with any investment decision, particularly around the
organisation’s capability to deliver value. M&As can be risky. There can
also be dangerous costs attached to poor recruitment decisions, and we all know
that our line managers walk a tight rope with their staff every day over unfair
or biased treatment. Consider bullying and harassment. I suspect the actual
cases of bullying reaching the courts are just the tip of the ‘iceberg’.
Great HR people are able to feel these pressure points and can smooth away
the tensions. They take a lead on risk, analyse and describe the dangers, and
put systems and practices in place to protect the business.
There is also an opportunity to put a financial measure on the scale of the
risk and the potential saving made by HR through action. I wish I had been
given the kind of budget our IT friends received to diffuse the so-called
millennium time bomb – the risk associated with getting HR issues wrong is
equally serious and we spend a tiny pro-portion on pro-active intervention in
A recent article in the Harvard Business Review highlights the wide
disparity in some companies on how quickly they bounce back from a major
adversity. Success or failure largely depends on whether risk is managed
proactively, and the degree to which there is a motivated and resilient
workforce as a result. Not rocket science, I know, but I bet there are many
organisations that would fail the test.
By Chris Matchan, Vice-president of consumer practice, Korn-Ferry