Top 8 Issues in Risk Management
Whether it’s addressing workplace accidents, keeping up to date on legal compliance issues, or handling unemployment claims, risk management is important for any business or organization.
Risk management programs aren’t just about minimizing crippling risks; they’re also an opportunity to reduce costs, save time, and gain the competitive edge.
But, there’s only so much you can do on your own. Learn about the top 8 issues in risk management and how a Professional Employer Organization (PEO) like Resourcing Edge can help.
What is Risk Management?
Risk management means different things to different people, but generally it refers to the management of anything that might jeopardize organizational goals. This includes liability and legal risks, financial risks, workplace safety, fraud, and data security.
Since each organization is different, there is no one-size-fits-all approach. This is why it’s so important to hire a Professional Employer Organization to help identify and mitigate the risks that are unique to your business.
In the world of human resources, risk management deals with things such as workers’ compensation, unemployment claims, and compliance and regulatory issues.
As a business or organization, you want to minimize potential risks as much as possible. Investing in risk management allows you to save time and money, reduce accidents, and be prepared when crisis strikes.
Top 8 Issues in Risk Management
Workers’ compensation claims cost businesses over $60 billion every year. In order to prevent accidents and injuries, save on workers’ compensation insurance, reduce the direct cost of premiums, and save on all the indirect costs of on-the-job accidents, it’s important to take a proactive approach.
Indirect costs can include hiring and training replacement employees, adjusting work schedules, investigating accidents, and implementing safety procedures and corrective measures.
Here are some things you can do to reduce workplace accidents and injuries:
Effective Hiring and Training
It’s important to hire qualified employees to reduce employee mistakes and increase productivity. Make sure you have sufficient time to find the right employee. Careful selection makes sure you have the best employee for the job.
- An application form
- Background checks
- Reference checks
- Effective and consistent interview techniques
Once you hire the right person, there should be appropriate training that incorporates a combination of different learning styles. Keep in mind that training should never stop. All employees need periodic refresher training.
Safety Programs and Guidelines
Prevent workplace accidents before they occur by teaching employees safety standards and procedures.
A PEO can help you set up:
- Safety programs, manuals, and guidelines
- Workplace inspections
- Drug testing and background checks
- Workers’ compensation insurance
- Workers’ compensation claims investigation, representation, and management
Remember, safety programs aren’t just documents. Hands-on, on-the-ground training is absolutely necessary for putting safety standards and procedures into action. There should be proper supervision and ongoing evaluation and support from management.
Despite proactive safety measures, accidents still happen. It’s beneficial for both parties to get injured employees back to work as soon as possible. The longer a workers’ compensation case remains open, the more expensive the claim becomes.
A return-to-work program helps employees get back to work even if it is on a part-time schedule. Getting employees back to work helps maintain workplace ties and increases the chance of employees returning to work.
How a PEO Helps
A PEO helps manage workers’ compensation costs and claims, while also increasing the safety of your employees and business.
A PEO can help:
- Choose workers’ compensation plan coverage specifically designed for your company.
- Save money by negotiating with insurance providers and eliminating fees.
- Take over administration of your existing policy.
- Evaluate and design safety programs to prevent workplace injuries.
- Implement a return-to-work program that reduces workers’ compensation claims and increases employee morale.
- Provide representation at claims hearings.
Payroll and Tax Management
All the reporting and filings associated with payroll must follow federal, state, and local laws and regulations. Complying with payroll regulations requires specialized HR expertise.
A PEO can help:
- File payroll tax documents.
- Create, file, and send W-2s.
- Administer unemployment, including plans, payroll collection, and claims handling.
- Calculate and withhold federal, state, and local payroll taxes — withholdings are electronically remitted to the government.
Payroll administration can present many potential risks, including wage and hour compliance, regulatory reporting, and federal, state, and local tax compliance.
The expert payroll professionals at Resourcing Edge can take care of the burden of payroll and tax management for you. Our online tools give you access to our Payroll Solutions 24/7, weekends and holidays included.
Technology, or lack thereof, can be a huge risk. You want to make sure your data is secure and develop a plan in the event of an IT crisis. Technology risks include hardware and software failures, human error, viruses and malicious attacks, and natural disasters such as floods and fires.
The increase of our dependence on technology has led many companies to develop an Information Technology Risk Management (ITRM) program. The goal of an ITRM program is to discover, anticipate, and avoid risks before they turn into problems that could harm the organization.
As businesses and organizations rely more and more on technology, the need for technology risk management increases. What are you doing to protect your digital data?
This is the time to assess whether or not you have a proper program in place to manage technological risk. Companies that ignore the risks associated with technology will end up paying the price later.
Here are some things to consider:
- Many companies have responded to technological risk by outsourcing data management to third parties, yet how much assurance do you have that they are handling data in a safe and secure manner?
- As companies merge and participate in joint ventures and partnerships, it’s important to manage your own technological risk properly, but what are you doing to ensure your partners do so as well?
- Workers’ interaction with company technology is not really thought about outside of work, but sensitive company information is often compromised outside the workplace. This can be private email accounts, social media, phones and computers. Is there anything being done to manage security breaches that occur outside of the workplace?
- Data quality and security can make the difference between which business fail and which succeed. Are you treating your data and technology as seriously as you should?
No company is an island. Today, every organization works with third-party intermediaries, usually in the hundreds or thousands. As organizations continue to interact with more and more third parties, it becomes increasingly important to monitor and identify the risks associated with them.
While it can be a challenge to determine third party risk, it’s important that Chief Risk Officers (CROs) and upper management thoroughly vet third parties before signing up. Third party vetting should also occur on a continual basis.
Fraud and Misconduct
In order to limit financial loss and damaged reputations, organizations need to continually monitor the risks associated with employees, vendors, and third parties to identify and prevent fraud and misconduct.
The majority of insider fraud is caused by collusion of two or more employees. This is because working together creates more opportunities to commit fraud and circumvent anti-fraud controls.
Here are some ways you can reduce the risk of employee fraud:
- Monitor all user behavior in order to detect unusual behavior, such as unusual changes to information systems, eyebrow-raising data searches, and sudden extravagant purchases.
- Segregating functions across roles and channels can help prevent fraud, but if there is collusion, you may need to find commonalities in employees’ actions. For example, a couple of employees are constantly viewing the same accounts. Multiple employees performing suspicious actions on the same accounts can indicate fraud.
- There are tools available that can help you uncover fraud by clustering events and identifying trends.
By monitoring and analyzing employee, vendor, and third party activity, organizations can identify suspicious behavior before any funds, information, or reputations are lost. The additional benefit of having fraud-detection systems in place is that employees are less likely to commit fraud if they know there is a significant chance of getting caught.
Employment risks cover a large scope. In addition to hiring the right people and providing adequate coaching and training, you also need to worry about wage andhour claims, nonexistent or incomplete job descriptions, workplace harassment, turnover rates, and more.
From discrimination and sexual harassment to wrongful termination and unlawful retaliation, a PEO can help prevent issues from happening in the first place as well as support and represent you in the event that a claim is made.
A PEO can help:
- Prevent claims by offering best practices and developing an up-to-date employee handbook that every employee must sign.
- Develop training procedures and schedules for all employee levels.
- Standardize processes for interviewing, hiring, onboarding, training, and firing.
- Provide claims coverage, such as Employer Practices Liability Insurance (EPLI).
- Manage claims and provide representation.
- Conduct harassment prevention training to identify, prevent, and address workplace harassment.
- Complete 401(k) plan compliance.
- Make sure health plans meet coverage requirements.
- Designate a single point of contact for questions and assistance.
- Provide expert support and guidance through regulatory and economic complexity.
Our comprehensive Employment Practices Risk Management program helps protect you from the many liabilities associated with discrimination, wrongful termination, harassment claims, and more.
In addition to ensuring compliance and preventing issues from happening in the first place, Resourcing Edge also supports you in the event that a claim is made. This includes claims coverage (Employer Practices Liability Insurance) and claims mitigation (active claims management).
Legal Compliance and Regulatory Requirements
Laws and regulations, enforced by a variety of agencies, affect every organization. In order to stay aboveboard, it’s important to anticipate and plan for regulations before they are implemented.
There should be protocols and mechanisms in place to manage regulatory change and evaluate current compliance. A PEO can help you assess regulatory risk and maintain compliance effectiveness by through active monitoring, testing, and reporting.
Here are just some of your obligations under the law when it comes to HR compliance:
- Job descriptions, advertisements, and interviews are ADA compliant and meet state requirements
- Written authorization for background checks
- Employees are properly classified as exempt or non-exempt
- Benefit plans comply with federal and state law
- Company policies and procedures comply with federal and state labor laws (paid leave, sexual harassment, worker safety, etc.)
- HR policies and procedures apply equally, fairly, and consistently to all employees
- Final paychecks are delivered as required by state law
This list is far from all-inclusive. It goes on and on. Complying with labor and employment regulations gets more and more complicated every year.
Prevent potential liabilities and lawsuits by contacting Resourcing Edge for a comprehensive HRAudit. We’ll make sure you are compliant with all federal, state, and local laws and regulations.
CROs and upper management should place a big emphasis on crisis management — scenario planning to deal with potential risks and crises, such as cyberattacks, regulatory scrutiny, workplace harassment, compliance challenges, litigation, and more.
Since these issues often occur without warning, it’s important to have a plan to deal with them when they occur. This can include on-call lawyers, IT experts, consultants, and other professionals in order to take swift action on a moment’s notice.
Top 5 HR Risks
- Employment – discriminatory practices, hiring the wrong candidate, “unjust” employment, errors in employment contracts and employee handbooks, and more.
- Labor Protection and Workplace Safety – physical injuries, uncertain working conditions, lack of safety checks, lack of staff training, inappropriate clothing and safety equipment, and inadequate or non-existing safety policies and procedures.
- Employee Supervision – insults, harassment, revealing personal information, inadequate job descriptions, no employee manual, disconnect between training and actions, and no adequate monitoring or discipline procedures.
- Leaving of Employees – compensation, organizational assets and equipment theft, and not deactivating all access codes and passwords.
- Compliance and Regulatory Issues – labor and employment regulations, compensation, payroll, taxes, benefits, and more compliance and regulatory requirements.
Risk management can’t eliminate risk, but you can save a lot of time and money by hiring a PEO to handle your HR functions. This includes proactive measures such as helping you come up with safety programs and ensuring you remain compliant with all laws and regulations, but also mitigation and claims support such as providing representation and active management of claims.
Where to Start
Obviously, there are a lot of risks associated with running a business or organization. Understanding organizational risk — employee, technological, compliance, and more — is critical.
But don’t panic! Rather than trying to tackle everything all at once, simply contact Resourcing Edge for an HR Audit to identify what’s working and what’s not when it comes to risk management.
You can offload many of your HR and employment-related risks and obligations to us. Resourcing Edge is an expert when it comes to human resources strategy, employee relations, and compliance issues.
By using a Professional Employer Organization like Resourcing Edge, you can take your mind off the day-to-day work of payroll, HR administration, and risk management and focus on what’s important — growing your business.
For more information on Risk Management Solutions for your business, don’t hesitate to contact Resourcing Edge at (214) 771-4411.