Human Resource Risk Management Insights
Human Resource Risk Management Insights
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RESEARCH NOTES
* Correspondence Citation:
Email:[Link]@[Link]
Golresan Kermani A. Beheshtifar M. Montazery M. & Arabpour
A., Human Resource Risk Management Framework and Factors
Influencing It. Propósitos y Representaciones, 9 (SPE1), e902.
Doi: [Link]
Nowadays, the importance of human resource risk in organizations has greatly increased, and
some thinkers refer to it as a core competency and a key responsibility for any human resource
professional. Thus, given the importance of the subject of the present article, the aim of this
study is to analyze the human resource risk management framework and the factors influencing
it. In this regard, using the library method, human resource risk framework was analyzed from
the perspective of management science thinkers of Paul and Milcher, Ernst and Young, Meyer,
Maenpaa & Voutilainen, Rotarsko, Li and Zhang, Pandey. Then, the factors influencing human
resource risk management were identified and mentioned, and Stevens' human resource risk
policies and procedures were presented. Then, the perception of risk and the factors influencing
attention to risk and action for it were stated. In the final section, theories related to risk
perception were discussed in the form of the Wild risk-homeostasis theory (1982) and the
Naatanen & Summak zero-risk theory (1976). Studies show that human resource risk
management frameworks provide a conceptual model for the systematic development and
planning of human resource risk management activities. They are also useful for assessing and
evaluating the level of human resource risk. These frameworks provide the basis for planning,
evaluating, and implementing human resource risk management.
Resumen
Hoy en día, la importancia del riesgo de recursos humanos en las organizaciones ha aumentado
considerablemente, y algunos pensadores se refieren a él como una competencia central y una
responsabilidad clave para cualquier profesional de recursos humanos. Por lo tanto, dada la
importancia del tema del presente artículo, el objetivo de este estudio es analizar el marco de
gestión de riesgos de recursos humanos y los factores que lo influyen. En este sentido,
utilizando el método de la biblioteca, se analizó el marco de riesgo de recursos humanos desde
la perspectiva de los pensadores en ciencias de la gestión de Paul y Milcher, Ernst y Young,
Meyer, Maenpaa y Voutilainen, Rotarsko, Li y Zhang, Pandey. Luego, se identificaron y
mencionaron los factores que influyen en la gestión del riesgo de recursos humanos, y se
presentaron las políticas y procedimientos de riesgo de recursos humanos de Stevens. Luego, se
expuso la percepción del riesgo y los factores que influyen en la atención al riesgo y su acción.
En la sección final, las teorías relacionadas con la percepción del riesgo se discutieron en forma
de la teoría de riesgo de homeostasis de Wild (1982) y la teoría de riesgo cero de Naatanen &
Summak (1976). Los estudios demuestran que los marcos de gestión de riesgos de recursos
humanos proporcionan un modelo conceptual para el desarrollo sistemático y la planificación de
actividades de gestión de riesgos de recursos humanos. También son útiles para evaluar y
evaluar el nivel de riesgo de recursos humanos. Estos marcos proporcionan la base para
planificar, evaluar e implementar la gestión de riesgos de recursos humanos.
Introduction
Nowadays, risk management in the field of human resources is becoming the most
important issue for managers around the world, and organizations are trying to define strategies
for their human resource risks (Dianti & Zare Zidi, 2017). However, stating its high importance
might not be accepted for some activists in this field and they might think that based on this
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perspective we will have negative view of human resources and its sectors, and in fact, we seek
to control all sectors and activities of human resources and thus limit the creativity and
innovation of employees (Romina & Momizan, 2015). These statements are made because we
do not really understand have a right perception of the risk of human resources and only
develop the concept of avoiding negative issues as the concept of risk in our minds, while in the
concept of risk in addition to this dimension, we pay attention to other dimension of this concept
that views risk as an opportunity to try to make use of it in the best way. In this approach, we
look at employees’ innovation and creativity as a smart risk that is an opportunity that we must
use it optimally. In fact, one of the main tasks of human resources professionals in this approach
is to develop a culture that encourages these innovations (Zare Ravasan & Dilami, 2014). The
main point in human resource risk management area is to create the vision for managers that all
these smart risks may not achieve their goals and this should not prevent employees from taking
risk. Accordingly, with regard to the concept of risk, human resource management professionals
should seek to identify the following two issues by examining the internal and external
environments of the organization:
Risk that could potentially be harmful to the organization and the focus of the risk
management perspective is on increasing productivity and minimizing the losses resulting from
this risk. Opportunities that may be missed and ensure that the risk of losing opportunities has
been minimized (Zare Ravasan & Dilami, 2014). Regarding human resource risk, Parker (1995)
states that this risk refers to a company's personnel policies such as hiring, training, motivating,
and retaining employees. Human resource risks are emerged in many forms, such as the risk of
losing key employees, the risk of insufficient or incorrect motivation among management staff,
and so on (Nadri & Mehrabi, 2018). Regarding employee risks, Stevens (2005) argues that in
controlling employee risks, behavioral risk analysis should first be performed and then the
organization's measures to allow or even reinforce behaviors related to employee risk should be
controlled. For example, it does not pay attention to the way the organization plans its major
changes or to issues such as communicating with employees to get their feedback on changes
(Dianti & Zare Zidi, 2017). In a study conducted by Aon Organization on 300 risk managers,
among seven main risks of organizations, the risk of human capital was ranked first from their
point of view and its most important indicators included hiring employees and retaining and
compensating their services (Aven & Renn, 2010). In this regard, Norons, one of the managers
of this organization, states that “It is a great issue and it's growing. Human resource operational
issues are also a major issue for managers in other sectors. These managers state that if they do
not perform these operations (related to human resources) properly, their business strategy will
fail if they do not do it properly (human resources) (Mitrofanova et al., 2017)”. Given the
importance of the subject of this article, the aim of this study is to analyze the human resource
risk management framework and the factors influencing it.
Methodology
The present article is theoretical in terms of type and descriptive in nature, and
fundamental in terms of objective. Information was collected using library methods and note
taking tools by studying books and articles related to the field of information research.
Investigating the human resource risk framework from the perspective of Thinkers
The framework proposed by Paul and Milcher (2008) for human resource risk
management is an integrated model that includes the three categories of environmental, strategic
and operational risks of human resources as follows (Jalilvand et al., 2017):
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1- Environmental risks:
Environmental or external risks are the starting point for designing a personnel risk
management system. For example, the economic environment includes factors such as the
growth of the work market and the advancement of technology. The political environment
includes the legal aspects of work as a source of human resource risk. Finally, risks in the
cultural environment include demographic changes and changes in workers' values (Jalilvand et
al., 2017).
2-Strategic risks:
Strategic orientation is one of the key elements of the human resource risk management
approach that has been forgotten in the past. The main problem of strategic management at the
present time is to keep the organization's strategy, structure, and human resource management
aligned. Human resource risks can occur in any of these three areas (Taslimi et al., 2013).
3-Operational risks:
In 2001, the Basel Capital Treaty 2 introduced a new section of risks called operational
risks. Operational risk is defined as the risk of loss due to inadequate or failed internal
processes, individuals, and systems, or external events. Based on the definition, it includes an
independent class of human resource risks (Taslimi et al., 2013).
The Ernst & Young Institute (2008) presented a comprehensive report on the risks in the
field of human resources. Using the survey method and the community of senior managers, they
concluded that the human resource risk cycle consists of the following four cases (Moloi, 2015):
Operational risk:
Strategic risk:
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•The area that needs the most focus
It means that human resource risk management is performed at the level of board of
directors. Thus, the human resource manager introduces the leadership of the human risk factor
to the organization (Meyer et al., 2011). This model also highlights the importance of people as
key components of risk management. People have a positive or perhaps negative impact on
daily risks. If managed actively, people will play a major role in creating and maintaining
cultural risk. However, risk management does not happen automatically. Thus, it is important to
develop a human risk factor policy and strategy for institutionalizing human resource risk in the
company (Hosseinzadeh & Bohlouli, 2016).
In the next step, the organization needs colleagues inside and outside of the organization
to optimize human resource risk management. Inside the organization, it requires cooperation
between different sectors (such as safety and health performance as well as the manufacturing
sector). Outside the organization, it may require a variety of cooperation with key stakeholders
to access accurate information and human resource management support. Finally, it can be
stated that human resource risk processes are at the heart of the framework. Once the
organization has developed all the capabilities of risk management, it is ready to cope with
risks. Although the organization might achieve a high level of maturity to cope with risk, it will
not be able to fully succeed in risk management. It can be concluded that the organization
always needs creativity and continuous learning (Hosseinzadeh & Bohlouli, 2016). According
to ISO 2009 standards, organizations need human resource executive managers require an
approach and framework in human resource risk management. The following example shows
how organizations can define ISO in the human resource environment:
Goal
The goal is to hire competent people with appropriate knowledge and skills to do the job.
Risk
There may be skill gaps in the market and in people who are considered for the position.
Event
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The decision is to take a risk to get a job, despite the skill gap defined by the organization
Results
Employees start working and providing work at moderate level and the result is that key
customers are lost and the business suffers from a weakness in human resource risk
management in hiring and selecting.
Figure 1. Different risks of human resources in 2011 in the world (Meyer et al., 2011)
Table 1.
Classification of human resource risk from different viewpoints (Maenpaa & Voutilainen)
relational capital risk structural capital risk human capital risk references
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distributors company
- Lack of innovation, patent
• -Potential product and copyright risks related
labels to patent
-Risks related to the
strategic alliance of
insufficient networks
- Dependence on - Flexible organizational -Loss of
subcontractors, structure competence Copie et
distributors and / or - Insufficient knowledge / -competence al (2008)
customers information structures constraint
- Non-supportive -problems to guide
organizational culture the competencies
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programs that are part of the practical and operational aspects of the organization training and
the individual needs of the participants in this process.
There are several steps to develop training program based on the process model:
4. Discussion
Weakness risk framework in Li and Zhang human resource talent management:
In a study conducted by (Li & Zhang, 2014), they examined the effect of risk and the
effect of creative talents, which include the following cases:
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Introducing talent leads to great wealth for companies. Innovative talents are not just
about working attitudes for life, more importantly, they are ability to achieve maximum value.
Level of wages to maintain talent plays a major role. All countries in the world, especially
developed ones, use different tactics in talent competitions. In the face of innovative talent
competition in the world, the company must strive to seize the opportunity to get creative talent.
Simultaneously with attracting and investing new talent, the development of existing talents is
necessary. If the company does not have a properly structured training and introduction
mechanism, additional costs will increase (Akbari Alashti & Khoshnood, 2012).
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* Risks of achieving to strategies:
- Loss of key employees
- Lack of organizational coordination - lack of synergy in the organization
- Failure in communication
- The failure of efforts to create integration in the organization
- Risks of non-compliance with the rules:
- Employment rules related to employment, counseling, termination of service ...
- Consensus on payment, working hours, health and safety
- Proper storage for retirement pensions (Fathi & KabiriPour, 2012).
* Business / Operating Risks:
- Risk of activity continuity (poor communication, poor coherence of program)
- Loss of key employees
- Risk of contracts
- Fractures caused by mergers
*Cultural risks:
•Different values and cultural norms
•Disagreements (focus on personal interests) among senior managers
•Different ethical standards
•Unconscious assumptions about power, position, and decision-making
* Financial risks:
•Retirement pension and benefits
•Problems caused by quitting work
•Costs of losing employees
•Rules of claims
•Moving costs
•Safety and health costs (Gholjash & Saeedi, 2016).
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Figure 3. Steps of human resource risk steps and procedures (Stevens, 2015)
Risk perception
Risk perception is a human factor because a person's perception is not based on
quantitative evidence but it is formed based on dimensions such as past experience, values,
attitudes, and personality traits. The factors influencing attention to risk and action for it are as
follows (Keyhan & Haji Alirezaei, 2014):
• One’s perceived level to perform tasks (how much a person feels they need to have the
skills to perform their duties).
• Past experiences of negative outcomes (on organizational events and risk)
• Probability of detection and types of penalties used to break safety rules
• Fees such as gifts and promotions to keep people safe
• Fees for breaking safety rules and principles like having more free time
• Personality traits
Age: Research shows that most people are at risk, especially for men under 35 (Stevens,
2015).
Theories related to risk perception
Wild risk-homeostasis theory
Wild risk-homeostasis theory (1982) states that individuals use the above-mentioned
factors to identify and maintain an individual level of risk perception for their repetitive and
daily tasks. Accordingly, if the risk level of task is reduced by using better equipment or less
dangerous procedures, the person is still motivated to maintain the individual level of risk
perception that he or she has previously created for the task. For example, with regard to car, as
cars are safer and easier to drive, the speeds and behaviors that create the same level of previous
risk perception will increase (Mohagher et al., 2010).
Naatanen & Summak zero-risk theory (1976)
With regard to risk perception, another theory has been proposed by Naatanen & Summak
(1976) under the title of zero-risk theory, which states that people are aroused to look for
conditions in which perceived risk is minimal. Given the importance of taking smart risks that
lead to creativity and innovation in the organization, which are nowadays vital in organizations
due to the changing conditions and competitive environment of organizations, it is
recommended that human resource professionals to do the following cases to promote smart
risks in the organization:
-Helping to redesign jobs / plans and procedures to create barriers to cope with negative
risk taking.
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- Creating wider safety boundaries (Mohagher et al., 2010).
- More effective selection and recruitment processes, and discussing on this issue where
the focus is on risk management in these processes (considering the risk management conditions
in the selection and recruitment processes).
- Primary training on risk issues, in which details can be provided based on the
organization's vision, values and strategies related to risk management and internal control, and
the way of translating them into individual responsibilities.
- Implementing development and learning programs within the organization that include
the desired elements of risk management processes based on an official and legal source
(Mehrani & Akhundi, 2018).
- A strategic review and ongoing processes for role / job redesign and team development
- Ensuring that job descriptions include specific responsibilities for risk management.
- Ensuring that performance management systems include a risk management element.
- Ensuring that penalty and reward systems are included in risk management performance
indicators.
-Establishing systems to identify optimal performance in compliance with the legal
requirements of risk management and risky intelligent behaviors.
- Ensuring that human resource systems comply with risk management principles.
- Ensuring that disciplinary procedures include examples of unacceptable risky behaviors
(Mehrani & Akhundi, 2018).
Conclusion
At the management level, risk identification and evaluation should be considered as part of
learning and development programs in relation to the tasks for which managers are accountable.
A competency framework can be used for risk managers needed to manage the organization's
risks. For this purpose, risk-listing tools can be used to identify specific task risks and the
behaviors and processes required to control these risks. In this regard, some experts emphasize
that the performance management system of managers should consider the requirements of the
risk management system of the organization in relation to managers and encourage the reward
system of effective risk management organization and smart risk management by them. Human
resource risk management frameworks provide a conceptual model for the systematic
development and planning of human resource risk management activities. They are also useful
for measuring and assessing the level of human resource risk. These frameworks provide the
basis for planning, evaluating, and implementing human resource risk management. In the
process of risk management, the organization considers the following dual role for human
resources: Human resources as a source of risk: For example, human resources may create
barriers to the implementation of organizational management programs or to achieve the goals
of the organization through the lack of necessary quality or error in work. Risk management:
The risk management process of the organization is done by human resources themselves and in
fact human resources have a key role in the implementation of the organization's systems,
including risk management and so on. In the effective management of human resource risks, the
following four factors are vital:
1-The organizational context in which the organization operates: for example, the activities of
the organization, organization ownership status
2- Organization’s public risk management policies and systems
3- People risks and human resource operations, individual and professional risks
4- Risks created by the business and operational processes of the organization.
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