Workforce risk management and mitigation

Workforce risks typically stem from the ways employee actions and behaviours affect their employers or involve external forces that impact their people. Consider, for example, the impacts of generative artificial intelligence, a technological disruptor that offers many opportunities but also carries significant risks and implications for both organizations and their employees.

An important priority for organizations looking to adopt generative AI will be ensuring they have the right people with key skills to see the full benefits of the technology. At a time of competition for and shortages of talent, the lack of skills in areas like AI represents an important workforce risk, especially given the pressures on organizations to reinvent their businesses through investments in technology. We saw evidence of this concern in our latest Global CEO Survey, in which 53% of respondents said a lack of skills was inhibiting their organization from changing the way it creates, delivers and captures value.

While these forces have been playing out for some time, they continue to intensify and layer on top of each other to further heighten the increasingly interconnected workforce risks they create. And while an organization may be able to deal with an issue or crisis related to one of these risks, it might find itself crippled when multiple events happen at the same time.

Adding to these challenges is the ongoing decline of societal trust, which only increases the need for leaders to better understand and mitigate their workforce risks given how they can impact an organization’s reputation and how both their people and their wider group of stakeholders view an organization. More than ever, companies are coming under intense scrutiny of their actions, whether a result of the spread and amplification of information (and disinformation) on social media or rising expectations from stakeholders. Among those keeping a close eye on what organizations are doing are regulators, which continue to roll out new regulations that bring significant implications for workforce risks given both the need to ensure compliance and some of the people-related requirements they introduce (see below for more details).

As they navigate these heightened expectations in an increasingly complex environment, how have Canadian organizations been responding? Typically, organizations start considering these issues as a reaction to events facing the business, the industry it operates in or society more broadly. More often than not, responsibility for managing the workforce risks caused by these events falls to human resources functions, which tend to respond in the ways they know best by, for example, rolling out a new policy or training.

The tendency to react to events means organizations may miss key risks or allocate significant resources to issues that aren’t their top priorities. A more proactive approach would involve taking the time to assess and understand the full range of issues they face, but recent studies show opportunities for Canadian organizations to do more to measure their exposure to risks and embrace new ways to navigate them. As we found recently in our Global Risk Survey, only about half (54%) of Canadian respondents have implemented an effective horizon scanning capability that offers a more holistic view of their risk landscape.

And by focusing the responsibility for managing workforce risks on the HR function, responses may deal with only part of the organization, whereas the most effective approach might require changes involving other areas of the business. Training initiatives on ethical behaviours, for example, may not be sufficient to address many of the workforce risks related to generative AI. While involving the HR function in such training is likely critical to managing these risks, it’s also important to bring in technology leaders to consider the need for measures like implementing an identity access management program to prevent disclosures of confidential information—such as employee salary or health data—through adoption of a generative AI tool.

The approach taken by many organizations means they may not fully benefit from the competitive advantages and improved financial performance seen by those that adopt best practices around managing risk and enhancing compliance. For example, they may miss out on the cost savings a more holistic approach can deliver by directing resources and investments to an organization’s priority workforce risks that offer the biggest opportunities for value creation or preservation.

The key to harnessing those benefits is to take a more strategic, enterprise-wide approach to workforce risk that’s underpinned by human insight and technology and rooted in the organization’s purpose and values. This means upskilling your teams and using data-driven tools to better understand, monitor and report on your organization’s workforce risks, determine your risk appetite and thresholds and prioritize areas that require the most attention and resources. This gives you a comprehensive view of your workforce risks so you can then take a broader perspective that supports and engages key functions across the organization in any changes made in response.