James E. Blair, President
September 2024

Dear Colleague:    
Pillars of People Risk! 

Likely the most significant risk we all face is people.  While risk comes at us every day from weather, climate, cyber, accidents, mis-behavior, theft, supply chains, manufacturing defects and many other unknowns, the risks associated with people are around us like a wet blanket.  Smart leaders invest in the people who populate their businesses – part of that investment must be in the people themselves.  The Marsh “People Risk 2024” report highlights five pillars of risk and the following includes their reporting and the experience of this author in effectively addressing the risks associated with people.  

Talent, leadership, and workforce practices – each of us laments the days when hiring employees seemed easier.  Talent was plentiful and candidates showed up when invited.  Too many organizations have overlooked the value proposition of effective people.  We hire, train, and mentor with no real understanding of the value an employee is expected to deliver.  An effective employee produces the expected work product.  But, what about the management and leadership skills to respond to risks associated with a crisis or very bad day, often now caused by a customer, product, technology, extreme weather, or cyber event.  What is your plan to mentor risk response and recovery in the teams you employ?  Leaders need to recognize employee needs, inspire engagement and loyalty.  We need to support people through their own rough times and then in moments of company crisis.  Actions such as this engender trust and are critical to supporting a culture of risk management.  	         

Technological change and disruption – technology is creating new approaches to work and the workplace.  Employees encounter new methods, supply chains, products, and fulfillment techniques.  Simultaneously, new risks are emerging such as cyber, security, data breaches, intellectual property theft, and now AI.  Managing these risks means creating a culture committed to protecting the business and the people in it.  

Health, well-being, and safety – risk and HR executives are now concerned about productivity losses associated with employees spending time and energy on sourcing, navigating, and traveling for health care.  Studies indicate that employees would give up compensation for more well-being benefits.  Employee health and safety is a cornerstone of an employee risk agenda.  However, the agenda is growing in complexity.  Mental health is complicated by daily stressors, suicidal thoughts, conflict management, burnout, and emotion management – all which now parallel concerns about physical safety and security.  We now have an opportunity to define and new paradigm for employee care and well-being within traditional systems of health care.  

Governance, compliance, and financial – increasing health and benefit costs is the highest-ranking people risk, driven by its high likelihood.  Costs and complexity are dramatically increasing due to regulatory and legal actions that can generate outsized judgements and penalties.  

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Leaders must plan and anticipate cost increases and deploy risk mitigation strategies to manage costs while ensuring that employees remain well to help manage claims costs.  More broadly, people risk issues are attracting increased stakeholder scrutiny, litigation, and regulatory activity.  Effective risk management looks ahead and anticipates changes in regulations and governance requirements.  

Environment, sustainability, and protection – increasing numbers of HR professionals are concerned about the lack of health benefits to support employee impacts of climate-related health conditions.  Extreme heat and severe weather are challenging conventional health benefits and care systems.  Cost of living pressures are weighing on employees and only 35% of executives report paying a living wage for their workforce.  Environmental risks have typically been interpreted as related to property damage.  Extreme weather events may not result in property damage, and therefore, a strong risk assessment of weather-related risk and natural disasters upon the health and well-being of employees is aa imperative.  

Duty of Care!  

Every organization bears the requirements of Duty of Care for employees, customers, contractors, vendors, and visitors.  We are required to provide safe properties which are well maintained and act when an unsafe condition arises.  The risk management responsibilities outlined above expand the view significantly and, as with all things risk, the opportunity to manage costs and find revenue through effective anticipation, mitigation, and response is real.  A solid vision of the risks associated with your people is an expanded duty and key responsibility for all.    

Productive, effective, responsive, creative, and ethical employees is every leader’s dream.  The entire life cycle of an employee is a series of events worth managing.  Thinking about risks associated with employees is a new chapter in the minds of risk executives and HR professionals.  Based on the premise that employees are the most important asset, they deserve risk management equivalent to Microsoft’s management of the Azure platform.    

These are part of the Risk Management principles foundational to the work of Integrated Risk Management Solutions, LLC.  We help you prepare and deliver trusted and responsive products/services.  I look forward to your thoughts and questions – please contact us. 

Manage Your Risks Well,
 
Attachment	
Risk Management is Every Team Member’s Business

Managing Risk = Cash Flow
Typical returns are 4:1 ROI and significant cash flow improvement!

Risk is anything that impacts cash flow!  Successful companies manage risk more effectively than competitors.  By practicing a “Risk Awareness” culture that engages every level of the business in prevention-centric behavior, cash flow is improved.
Key Risk Management Facts:
•	Companies spend between 7 - 10% of revenue on risk-related costs, including:
   - Safety 		- Security			- Information Security      - Health & Wellness
   - Absence*	- Theft			- Fraud Prevention	 		- Revenue Inefficiency 
   - Audit 		- Compliance 	- Investigations 	    	 		- Settlements 
   - Claims 		- Insurance 		- Crisis Management 	 	- Emergency Response
       * Incidental absence can increase the costs of employee health and wellness programs by 2X.

•	Risk costs are in multiple silos hiding the “Total Cost of Risk” and measurable ROI.
•	80% of company information system risks come from employees and trusted vendors.  
•	FM Global, a world-wide property insurance and engineering firm, estimates that company earnings volatility can be reduced by 50% through effective Risk Management prevention and preparedness programs.  
•	Companies that manage risks effectively will receive the best insurance prices and maximize the option to self-insure.  
•	Enterprise-wide Risk Management is a complete vision of company risk.  A strong Risk Management culture helps a company respond more nimbly to unforeseeable events. 
•	Documented and tested Business Interruption/Scenario Plans sustain key operations during an emergency and improve company survival by 70%.
•	Uncertainty and financial pressure renew the need to manage risk.  These pressures have always been present, but the magnitude and visibility are at an all-time high.    
•	Third party vendor transactions often result in 10% or greater errors and inaccurate billing.
•	Sarbanes-Oxley, Dodd-Frank and compliance audits only test transactional controls – operational controls are “the source” of risk – Operations Assurance is the key!  
•	Regular Operations Assurance reviews can improve revenue efficiency by up to 20%.
•	Synergy from a holistic focus on risk, cost/revenue efficiency, loss reduction, underperforming vendors and fraud produces impactful cash flow improvement.

2024 Global Risks Defined by:

World Economic Forum 
•	Misinformation & Disinformation 
•	Extreme weather events
•	Societal Polarization 
•	Cyber Insecurity
•	Interstate armed conflict
•	Lack of economic opportunity
•	Inflation  
•	Involuntary migration
•	Economic downturn
•	Pollution

      
 The Conference Board
•	Economic downturn/recession
•	Inflation  
•	Global political instability
•	Higher borrowing costs
•	Labor shortages
•	Rapidly advancing AI technology
•	Higher labor costs 
•	ESG backlash 
•	National debt
•	AI Risk Governance 

Manage Your Risks Well!
January 2024