There are a number of ways your business could be at risk. One minute you’re generating revenue, the next you’re churning customers. Next you turn to downsizing departments and laying off employees. This, of course, leads to an increase in legal costs and challenges—a compliance nightmare. While we’re describing a worst-case scenario, the reality is running a business presents a number of different challenges.
“Some of these potential hazards can destroy a business, while others can cause serious damage that can be costly and time consuming to repair,” writes the staff at Investopedia. “Despite the risks implicit in doing business, CEOs and/or risk management officers – no matter the size of the business, from small to corporate giant – can prepare for them if they know what they are.”
The role of HR in your business risk analysis
While risks are inevitable for businesses, you can equip your employees and organization with appropriate risk-management strategies. Before you do so, however, you must first equip upper management by identifying potential business risks. According to Travelers Insurance some of the top perceived business risks of 2014 include medical-cost inflation, increasing employee benefit costs, legal liability, cyber risk and regulatory compliance—just to name a few. If some of these risks affect your business, the first step is awareness. Second, it’s defining the actions to alleviate those risks. Take legal liability for example. If you have liability policies and coverage in place you can mitigate this risk.
When you’re structuring your business risk analysis, start by thinking of the scenario or process that can potentially put you at risk, such as hiring or employee conduct. Next, think of the potential risks associated with it and from there you can develop strategies for managing them. Some risks may be more severe than others, so prioritize accordingly, especially if you’re a small business with limited resources.
Compliance KPIs HR must track
Put simply, key performance indicators are essential to your business. According to Janine Popick in a contribution to Inc: “KPIs are important because they help you evaluate, on an ongoing basis, the success of a particular part of the business or a specific activity. They can be used in almost any part of a company. In finance, you can establish KPIs for revenue or operational expenses; in marketing, the rate of customer acquisition; in HR, the rate of employee turnover. The list goes on.”
In the case of compliance you would use KPIs to measure the effectiveness of company policies and procedures. Ultimately, are they fulfilling their defined objectives? You can identify this by conducting frequent KPI compliance assessments to determine whether your policies are effective. Recruiting, performance and employee loyalty are among a few of the KPIs human resources must track to minimize business risks.
Evaluate the effectiveness of your changes
Now that you have implemented changes, it’s time to evaluate their effectiveness. Quality KPIs can help you measure the effectiveness of your business risk analysis and help you turn it into quantifiable data. This will ultimately help you determine whether the risks have changed. Ultimately, did HR successfully mitigate these potential risks by implementing an analysis, or is there work that still needs to be accomplished? By revisiting your business risk analysis regularly your organization can stay on top of adverse situations and implement strategies to manage it.