| The road to risk resilience. |
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In addition to the risk created by the current market turmoil, a range of longer-term trends have shifted human capital risk up the corporate agenda. For example, significant shifts in demography are increasing the pressure on retirement and healthcare provision as well as contributing to a growing skills shortage and talent war. Companies must also grapple with the challenges of financing their commitments to employees.
Significant trends in demography: the five unstoppable workforce trends
The Prevailing “Perfect Storm” of Human Capital Challenges
Yet surprisingly few organisations are managing human capital risk effectively.
Jamil Husain, HR Consulting Leader at Hewitt, used the following statement to illustrate his point: “Despite acknowledging the importance of the skills issue, just 32 per cent of risk managers said that they manage human capital risks effectively. The only areas where they feel less confident are risks associated with terrorism and climate change.” (Source: Economist Intelligence Unit 2007/8 – “The Risk Function Comes of Age”)
“HR people are running scared from discussions about risk, too often they don’t have the questions, let alone the answers,” he warned. The key to joining up risk and opportunity, leading to the effective management of Human Capital risk, is data.
“In becoming risk resilient you have to take the numbers as a starting point. You have to have the right data and know how to use this information effectively to go for the prize.”
“HR for the future is taking the lead in advanced data mining and the predictive modelling of Human Capital processes – moving towards fact-based analysis to identify new business insights,” he added.
However, HR often feels that it lacks quality data. Many companies can spend millions on HR systems but still end up as DRIPs – Data Rich, Information Poor. Jamil sees an HR R&D function as key to applying financial management and risk practices to the way we manage human capital data in the future.
Common disciplines needed within an holistic approach to Human Capital management
Mark Wells, Group HR Director for data mining company Experian, pointed out that, by using data effectively, HR is in a position to answer key questions and back them up.
Some of the key questions that HR should be able to answer
"Out of all people risks there’s always an opportunity,” he explained. “For example, we are about to embark upon a major leadership programme. Because we have the data to show why it is necessary, it will be going ahead, even in the current environment." “Data on its own does very little,” he added. “Insight based on data helps businesses succeed.”
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