Human Resources

From Open Risk Manual

Definition

Human Resources, in risk management context, denotes a set of challenges to the firm's business plan and franchise value due to adverse climate among its employees.

Certain types of human resource issues are covered separately under the Operational Risk category of Employment Practices

Nature of the risk

Examples of human resources risk subtypes include:

  • Failure to execute business strategy (to the extend this depends on internal staff)
  • Departure of valued staff (Key Person Risk) with both financial and reputational implications
  • Low staff morale, leading to low productivity, limited ability to execute

In general the quality of human resources forms the "human capital" of the firm, which is a significant component of its franchise. Risk factors are linked to potentially more structural deficiencies, including:

  • Inadequate skills, leading to low productivity, limited ability to execute
  • Inadequate compensation with respect to the market
  • Poor risk culture, leading to financial loss, legal and compliance fines and reputation loss

Issues and Challenges

  • This area is not particularly developed from a risk management perspective

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