Almost every successful organization would quickly recognize that its most important asset is a base of dedicated and intelligent employees. Today, companies spend significant time and money finding, keeping and motivating this talent with a team of “talent management” professionals. These talent managers do not outwardly focus on mitigating risks to the organization, but in fact this is exactly what they are doing. They are effectively reducing the risk of not having the right talent available at the right time.
Risk managers, on the other hand, are outwardly focused on aligning risk exposure and risk appetite with organizational objectives. Yet as a facet of this responsibility, risk managers must be able to rely on risk professionals or other skilled employees within the company. It is clear that a strong link between talent and risk management exists and should be both identified at the board level and communicated between talent and risk people.
This whitepaper, published by Deloitte, describes how a Risk Intelligent Enterprise is able to integrate perspectives from both talent managers and risk managers as a combined approach to increase enterprise value. The Risk Intelligent Enterprise Framework requires three components for effective risk management.
- Risk Governance
- Risk Infrastructure and Management
- Risk Ownership
Risks of Talent Management
In this whitepaper, Deloitte encourages organizations to include talent as a key risk in enterprise risk management. Consider the ability of a company to operate effectively without the right staff at its disposal. Not only does talent risk need to be considered at the board or executive level, but also at the level of risk owners and individual employees throughout the organization. With the increased disclosure requirements concerning compensation risk the compensation programs behind this talent should be reviewed from the start rather than as an afterthought.
While a strong talent base is a strong asset, one that is unethical can actually be detrimental as it may cost the company money due to fraud or turn away new recruits with their behavior. The ethical values instilled by the board in employees at all levels of the organization are also a key facet of reducing risk. The code of conduct should be clearly communicated in a way all cultures within the company can understand and appreciate. Most of our time has lately been spent working on the “tone at the top”, while this whitepaper encourages risk managers to also keep an eye on the “tone in the middle”.
Managing Both Talent and Risk
Compliance is a staple in the long list of organizational objectives yet it is easy to see that several compliance issues actually lie with talent management including hiring and termination, compensation and benefits and health and wellness. Therefore, the person overseeing compliance in HR should play an important part in risk management by communicating those requirements to the board and ensuring employees are carrying them out correctly.
Considering the significant amount of worker’s compensation claims noted today, the safety of employees represents not only a compliance risk but also financial and reputational risks if safety is not ensured. Deloitte points out that while companies have historically focused strongly on avoiding fines related to worker’s compensation, the creation of value from this risk is rarely considered. Possibly, by using safety analytics, employees can be utilized in the company in a way to effectively reduce safety risk by placing them in particular roles or functions.
Every company can agree that business continuity planning or disaster recovery is vitally important. However, this whitepaper has found that most companies are actually destroying the value of business continuity planning by using the wrong mix of talent to run it. Deloitte recommends this mix:
- The CEO should lead the program through endorsement, monitoring and public promotion.
- Disaster planning teams should include a mix of experts and people from the business.
- Plans should be created to run the company with a reduced staff under tough conditions.
- Communicate the program to all employees, thereby creating more value in their eyes.
Creating a Culture
While management can create robust risk management techniques and guidelines, it is actually the “unwritten” rules that often govern a company. The true culture of how employees perceive their roles, requirements and management’s actions will quickly overrule anything written on paper. Executive management should take an honest, often hard, look at these unwritten rules and effectively change their own behavior if they are asking the same of employees.
A good way to begin the bridge between talent management and risk management is to open lines of communication. Gain a better understanding of how talent managers actually fit into risk efforts and see how working together may actually help both areas reach their goals.
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