HR and Financial Risks, from Bernadette Petitpas
Who hasn't heard of risk management, whether or not it's associated with the granting of credit facilities, or enterprise risk management (ERM)?
Analyses from a financing perspective focus mainly on financial aspects as well as regulatory and operational aspects, i.e., those associated with customers, suppliers and partners, and reputational risks. In the context of export support, there are also country-related elements, including political, socio-economic, legal and supply chain aspects.
The Canadian Institute of Actuaries, perhaps because of its concern for stability, is also interested in risk resilience, risk culture, and in particular the risk tolerance of an organization or one of its entities. It will encompass the full range of risk management capabilities and expertise, business processes, operational and technological infrastructure, and the governance and control framework applied to identify, assess, manage, monitor, report and communicate risk on an ongoing basis in the day-to-day pursuit of business strategy and objectives.
In addition, when assessing both likelihood and impact, human resource management elements will be primarily associated with the loss of key employees, compensation, particularly incentive or stock-based compensation, or occupational health and safety issues. In merger or acquisition contexts, the culture will also be analyzed... and this is where it gets complicated, since views and perceptions vary, notably depending on the industry, the hierarchical level, the role in the transaction, the region and country, as illustrated by a Mercer survey.
When one considers that 90% of the respondents in this study would be willing to leave a job because of a poor cultural fit, it’s easy to see the extent of the financial risks that this can represent.
Strangely enough, while the majority of organizations considering a transaction, and there are many of them, contemplate the issues related to talent management or more broadly to the human aspects to be critical, many organizations have not yet integrated into their mission, vision, values, governance, and practices, in short, into their culture, the significant evolution that has been observed over the last ten years in terms of employee needs and expectations, all roles and hierarchical levels combined. Let's just mention the fact that work is only one facet of their lives; there is also the need for autonomy but also for listening and involvement, the search for meaning, the rejection of traditional models that are too rigid, the need for change and evolution, and the importance given to the network and signs of recognition.
These are the types of risks to be considered in these multiple circumstances....
But tell me, do you think these risks also exist when the organization is not considering financing, international expansion, or transactions?
Will it cost you less to lose that key employee on whom the success of a major project depends or access to those prospects you would like to convert?
Will the opportunity cost be calculated differently?
Will a failed hire, because of a poor fit in terms of skills or culture, delay you less and have less impact on the files entrusted to it if they are not event-related?
Will you have to spend less time managing transitions and departures, employee reactions to departures, or the entire process of recruiting someone else?
All the time that could otherwise have been spent on activities that support the achievement of company objectives. Not to mention the direct costs—those associated with possible severance pay, job postings, and the use of external resources.
Will under-utilized employees and those who are bored perform better?
Will those who have been given more responsibility, those who are not adequately supervised and supported, make fewer mistakes or dare to ask for help?
Will those employees who are criticized without support in their development, those who are reprimanded when they point out what their managers do not want to see, be less interested in riding the wave or in seeing if the grass is greener elsewhere?
Will your employer brand— your image—suffer less from all this just because the difficulties are not related to a particular event but are "just" part of the ordinary?