“Business people need to understand the psychology of risk more than the mathematics of risk.” ― Paul Gibbons, The Science of Successful Organizational Change: How Leaders Set Strategy, Change Behavior, and Create an Agile Culture

1. Risk Management in HR
www.humanikaconsulting.com
Management
HUMAN CAPITAL:

2. Seta A. Wicaksana
0811 19 53 43
wicaksana@humanikaconsulting.com
• Managing Director of Humanika Amanah Indonesia –
Humanika Consulting
• Managing Director of Humanika Bisnis Digital –
hipotest.com
• Ahli Senior di Komite Kebijakan Pengelolaan Kinerja
Organisasi dan SDM (KPKOS) Dewan Pengawas BPJS
Ketenagakerjaan
• Lecturer Fakultas Psikologi Universitas Pancasila
• Pembina Yayasan Humanika Edukasi Indonesia
• Book writter: “SOBAT WAY: Mengubah Potensi menjadi
kompetensi” Elexmedia Gramedia 2016, Industri dan
Organisasi: Pendekatan Integratif menghadapi
perubahan, DD Publishing, 2020
• Organizational Development Expertise
• International Certificate of HR As A Business Partner
• Doctoral Candidate in Economics, Fakultas Ilmu Ekonomi
dan Bisnis Universitas Pancasila in HRM.
• Fakultas Psikologi S1 dan S2 Universitas Indonesia
• Mathematics: Cryptology sekolah ikatan dinas Akademi
Sandi Negara

3. Introduction
➢ There is a ruthless and increasing competition
in all economic sectors.
➢ Quality became important for competitiveness,
specially in the service firms.
➢ Quality is a fundamental factor in increasing the
competitiveness and realizing the goals and
performances of firms operating in the service
industries.

4. Why Do we Study HC Risks?
➢In the last decade, RM has emerged and progressed
rapidly in business management field.
➢The scholars were focusing on identifying a missing link
in RM field, which is the human link.
➢This is why the scholars study the role of human in the
organizational risk issues – HC Risks.

5. Human Capital
“The uncertainty arising from changes
in a wide range of workforce and
people management issues that affect
a company’s ability to meet its
strategic and operating objectives”
Young & Hexter, 2011

6. Negative Outcomes of
HC Risks
• Lack of suitable HR risk management,
in addition to other factors in business,
leads to poor governance, poor service
quality and poor competitiveness of
organizations.
• HR risks can threaten a project and part
or whole of an organization,
• Failure to manage HR risks may
threaten the sustainability of
organizations.
• Therefore, people are key for attaining
organisations’ objectives and goals.

7. 4HC
RISKS
(Ernst & Young, 2008)

8. HC Strategic Risks
Definition : People -related issues that limit the
ability to achieve strategic objectives
• Key Sub -Areas :
• Talent Management and Succession Planning
• Ethics and Tone at the Top
• Alignment of Pay and Performance

9. HC Operational Risks
Definition: – Meeting
organizational objectives through
effective/efficient use of human
resources
• Key Sub-Areas:
• Internal controls
• Policies and procedures
• Vendor management and
sourcing
• Employee training and
development

10. HR Compliance Risks
Definition: Processes/controls to keep a
company out of trouble.
Note: reducing these risks has little
bearing on being able to “make the
business better. ”
• Key Sub -Areas :
• Regulatory compliance
• Fraud
• Monitoring regulatory changes

11. HR Financial Risks
• Definition: Global
organizations view this,
along with compliance,
as the most traditional
categories of risk
• Key Sub -Areas :
• Equity/incentive
compensation
• Financial accounting and
disclosure
• HR performance metrics
and cost management

12. 5 basic principles
organizations should follow
• Hiring the Right Talent
• Proper Education and
Training
• Create an Employee
Handbook and Update
it Regularly
• Conducting Scheduled
HR Compliance Audits
• Communicate,
Communicate and
Communicate

13. Top 8 HC Risk Management
1. Workplace Culture
2. Workers Comp Injuries,
Medical Costs, and Lost
Productivity
3. Employment-related
Lawsuits
4. Employee Benefits Liability
5. Network & Data Security
Risks
6. Theft & Embezzlement
7. Training & Competency
8. Turnover

14. Workplace
Culture
• The team culture
that unites
everyone in the
organization to
achieve the desired
goals of the
organization’s
leadership.
• The second culture
is one of safety
and risk
management.
•Employee Unrest – caused by either the
perception of unfair treatment or concern
over the direction of the organization.
Impact: higher employee turnover,
decreased morale, decreased productivity,
and a drag on overall growth.
•Lack of Leadership – most organizational
failures relate back to a breakdown in
leadership. This is never more apparent
than cultural failures. Leadership needs
to buy in and practice what they preach in
both of these areas. ‘Do as I say and not
as I do’ is a recipe for disaster here.
•Uncontrollable circumstances – these
can run the gamut from catastrophic
weather to economic crisis. In these
situations, a strong culture can save the
organization. However, it is exceedingly
rare that a lackluster culture is improved
by an external crisis. Typically, even
average organizational cultures fail during
chaotic circumstances.

15. 2. Workers Comp Injuries, Medical
Costs, and Lost Productivity
• Worker injuries can be
prevented but you’re
not going to be able to
prevent all of them.
• They do happen from
time to time. Some of
them may result from
freak accidents but
often, they result from
an unsafe work space,
improper procedure,
or an outside
influence (think hit by
a reckless driver).
Potential impacts to your
organization may include:
•Loss of productivity
•Increased labor costs (Anyone
able to work overtime?)
•Decreased employee morale
•Medical & Disability
payments
•Fines and Regulatory Penalties
(Hi OSHA! Haven’t seen you in
a while.)
•Employee Turnover Expenses

16. 3. Employment-
related Lawsuits
• The kicker is it can be
inadvertent just as
much as it can be
intentional.
• organization
needs processes in
place to make certain
that employees feel
like their complaints
and feedback are
heard and taken
seriously.
Here are some effects:
•One or several lawsuits that will cost you
significant sums of money for legal defense,
damages, and even the employee’s attorney
fees in states that allow fee shifting.
•Employee morale will plummet if the
collective opinion is that the organization
isn’t doing enough or nothing at all to
protect them from discriminatory treatment
or an unsafe work environment.
•Decreased employee productivity and
increased missed days – if you don’t feel safe
where you work, you’re not going to have too
many reservations about calling out ‘sick’.
•Tarnished brand image – if it gets bad
enough, a toxic work environment can lead to
a negative opinion within the business
community and pool of potential new hires.
You might simultaneously find
yourself unable to hire top talent and losing
business out the back door based on this
public image. In the present age of
technology, this type of information spreads
like wildfire and can be memorialized forever.

17. 4. Employee
Benefits Liability
Always keep in mind
that how you
administer your
benefits program can
open you up to risks
related to who has
access, how you
inform them about
their eligibility,
support in enrolling,
and what they are
covered for (or
receiving).
Beware of these specific causes and
effects:
•Poor communication can result in
employees or dependents
misunderstanding which benefits they
are eligible for, deadlines for eligibility,
or extreme disappointment when
employee expectations are not
met…results in lower morale, higher
employee turnover, and a potential
lawsuit (legal expense and damages)
•Program Design issues can
be inadvertent or intentional;
inadvertently excluding eligibility for an
employee or group of employees or
intentionally excluding eligibility when
regulations or legal statutes are
misunderstood or ignored…results in a
very costly lawsuit (legal expense and
damages) as well as potential regulatory
fines.

18. 5. Network &
Data Security
Risks
From opening suspicious
emails to voluntary
sending log-in credentials
or financial
information, your staff is
on the front line of
combatting intrusion or
possibly opening the
door, so a hacker can
waltz right on in. The key
here is training and
awareness because the
causes mostly relate back
to improperly followed
procedures.
Potential costs:
• Lost data
• Network and
business interruption
• Lost revenue during
down time
• Costs to fix the
damage or replace the
data
• Forensic audits
• Regulatory fines &
penalties

19. 6. Theft & Embezzlement
• Theft is a very common and often difficult risk of loss
to protect against. It seems like every year there is a
story about a disgruntled or financially strapped
employee that has pocketed a large sum of employer
money.
• The causes here vary but often it comes down to
an employee who has fallen on hard times, has a
behavioral issue (ie – gambling habit), or is
disgruntled and wants to settle the score.
• The ultimate losses here are any assets that are
unrecoverable, the loss of an employee (sometimes
they’re even really good at their job), and any public
relations exposure associated with the event/s.

20. 7. Training & Competency
• This risk really crosses every aspect of your
organization’s daily operations. Training &
Competency failures typically result from a poor
or missing program that doesn’t set your
employees up for success.
• Causes here are usually apathy or unawareness of
training deficiencies. The results are across the
board from liability lawsuits brought by customers
or outside third-parties, a hacking event, an
employment liability claim, repeated workers comp
injuries, and even all the awful effects of an
employee death.
• Most Risk Management Services programs focus
heavily on training.

21. 8. Turnover
• Turnover is a common theme in almost every
aspect of HR Risk Management. The causes
originate from everything above. The costs of
unhealthy employee turnover rates can be
crippling for an organization.
• In fact, some studies show that a single lost
employee results in expenses equal to a
multiple of that employee’s yearly salary.

22. Prioritizing Risks (cont.)
Impact
Rank-order risks in terms of two key indicators:
Likelihood
-

23. Prioritizing Risks
With respect to each
potential risk:
• Is it relevant to your
organization?
• Might it have a material
impact on your
organization?
• If relevant and material,
is it an enduring risk?
• If relevant, material,
and enduring, is it
addressable?
Lesson: Focus where it
matters most!

25. Some Definitions
• Uncertainty: The degree we are unsure about
whether an outcome will occur and its
consequences, good or bad.
• Risk: An undesirable outcome and its
consequences.
• Opportunity: A desirable outcome and its
consequences.

26. Alternatives for
Dealing with Risk
• Tolerate – no steps to address the risk
• Eliminate it; the possible outcome is
unacceptable
• Minimize the likelihood of an outcome
occurring and/or its potential impact as far as
possible
• Diversify the risk across a number of different
areas
• Concentrate all risks into one area or theme
• Hedge – assume additional risks to be able to
reduce exposure, should the risk in question
arise
• Transfer the risk to an external party, or
purchase insurance
Source: Lambert (2010)

27. Danger
Don’t allow this perspective to
dominate the way that leaders
approach human resource strategy
• Might miss important opportunities!
• Taking advantage of opportunity = placing your
organization in position to benefit from an
uncertain future event

28. Keys Take Away
• HC risks are present at every
step of the hiring, retention,
and daily operations
processes.
• Take a proactive approach
and make sure that human
resources planning is
always top of mind.
• If it isn’t, the consequences
will sneak up on you and
these issues have a habit of
snowballing. So be safe, get
out ahead of them.
• And will lose the Talent.

29. Learning and Giving for
Better Indonesia
www.humanikaconsulting.com