Execs not monitoring HR risks

But 43 per cent of execs say these areas will gain exposure over next 3 years

Global executives are not monitoring HR risks with the same scrutiny as other traditional risk issues, leaving them open to severe financial consequences, according to a new report by Ernst & Young.

Global HR Risk: From the Danger Zone to the Value Zone surveyed 150 global finance, HR and risk executives from Fortune 1000 companies.

Forty-one percent of respondents say the board of directors either never formally reviews the company's HR risk profiles or only reviews them on an ad hoc basis. However, 34 per cent say traditional corporate risk matters are formally reviewed on at least a quarterly basis, and 14 per cent say they are never reviewed on an ad hoc basis.

"HR risks are the challenges that stem from managing your people, programs and processes, both inside and outside the walls of your business," said Bill Leisy, Americas markets and services leader at Ernst & Young. "By proactively addressing these areas, the C-suite, as well as those in HR and finance, can drive sustainable, positive business results. But if not managed properly, these issues may cause significant damage."

Other results demonstrate HR risks are not properly communicated or reviewed on an enterprise-wide level:

• 42 per cent validate and prioritize their HR risk profile

• 43 per cent analyze HR risk coverage by business unit and develop, monitor and enhance their plans

• 46 per cent validate their HR risk profile with executive management and the audit committee

• 56 per cent of the respondents say they identify and document the likelihood and impact of HR risks to the organization.

However, there are signs more executives are beginning to take HR risks seriously, with 43 per cent of respondents saying the area of strategic HR risk, where organizations have the ability to improve business performance, will gain the most exposure over the next three years.

Respondents also said they will also be giving priority to areas of individual risk, such as talent management and succession planning, leadership ethics and pay and performance alignment.

"There is a definite awareness in the marketplace about HR risks, as HR, finance and risk executives all ranked these items among the most important issues facing their organization," said Frances Marbury, executive director of HR risk advisory services at Ernst & Young.

"But despite this recognition executives are not managing these areas with the same intensity as they do more traditional challenges. Unfortunately, this could leave both the executive, as well as the organization, vulnerable to numerous issues."

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