Coronavirus Must Act as a Wake-Up Call on People Risk Management

The COVID-19 pandemic should act as a wake-up call globally regarding the management of people risks as businesses experience first-hand the reality of having large numbers of staff unwell or unable to work.

Research from the BSI¹ found that people risk is the number one cause of disruption for businesses, but it was ranked only fifteenth by risk managers.

People risk impacts have become immediately clear during COVID-19, ranging from lower output due to business process disruptions or slower productivity owing to a disengaged workforce.

One of the less obvious impacts has been the increased fragility of an organisation’s reputation. Being seen as disorganised or indifferent to employees’ and customers’ needs can hinder the ability to retain and recruit talent after the crisis passes. Similarly, the added stresses on employees and systems can lead to safety incident risks and data privacy violations, which could cause further reputational harm and result in regulatory penalties.

Although many of these people risks are not unique to a pandemic, COVID-19 is a stark reminder that failing to act on them could contribute to ravaged reputations, lower productivity, and falls in market share.

People risk must be a higher priority

When COVID-19 started to spread widely, companies searched for solutions to mitigate threats to their people and operations. Those with risk management plans that addressed pandemic directly or adapted to it generally responded quickly; others have had a more difficult time.

By and large, efforts to better protect employees have fallen to HR departments.

In part, this is a natural consequence of the role that human resources plays in employee hiring, firing, and management, but it is also a by-product of the intense focus in the risk world on property and casualty threats.

And while human resources managers have made great strides in building employee engagement programs and introducing benefits, what is rapidly becoming apparent in the pandemic environment is that staff well-being must become a higher priority on the risk management agenda.

Ignore people risks at your peril

Organisations that do not manage people risks face severe consequences. The World Health Organisation² (WHO) estimates that between 4% and 6% of global GDP is lost annually due to work-related health problems. The average staff turnover for a company with no benefit plans is 157%. And companies that cannot retain key employees underperform competitors by as much as 11%.

Businesses that fail to tackle people risk may face:

• Business interruption due to issues including key man loss, talent shortages, long work hours, stress, pandemics, mental health issues, illnesses, and injuries.
• Damaged reputation due to inadequate or non-existent benefits coverage, poor health and wellness care, or poor family protection.
• Employee dissatisfaction leading to high turnover.
• Rising costs of employee benefits provision due to medical inflation or unmanaged claims experience.
• Governance and compliance issues as regulations vary considerably by location, leaving employers vulnerable to non-compliance and penalties.

How to get people risk right

To address people risk, businesses need to break down silos and encourage risk managers to work with HR, and bring the discussion into the C-suite. Companies should place people risk firmly on the management agenda, view it holistically, acknowledge its linkage to other risks, and manage it accordingly.

Businesses that understand people risks and manage benefits plans judiciously can better achieve their business objectives and minimise unplanned costs and brand damage.

COVID-19 has made it clear that there’s nothing more critical to the health of a business than the health of its people. Managers should ensure as the current pandemic passes that people risk doesn’t slip back down the agenda.

To find out how benefit plans can mitigate people risks like COVID-19, click here.

[1] Source: https://www.hsmsearch.com/Employee-illness-biggest-business-disruption
https://irishtechnews.ie/employee-illness-biggest-disruption-to-businesses/.
[2] Source: https://www.who.int/news-room/fact-sheets/detail/protecting-workers%27-health.