Article: The curious case of 'HCM': Anticipating & averting risks involved


The curious case of 'HCM': Anticipating & averting risks involved

Risks involved in Human Capital Management cover a broad spectrum such as skill shortage, succession planning, employee insurance, ethics and behaviour, loss or violation of intellectual property, compliance of government regulation and supply chain risks.
The curious case of 'HCM': Anticipating & averting risks involved

Often an organisation fails to address the risks involving its employees, and therefore, any adverse situation concerning them is usually left for the HR department to deal with. It is, however, imperative to understand the importance of identifying employees as a valuable asset and a future investment for every organisation. Human Capital Management in a business venture is extremely significant due to complexities and the human factor involved. With start-ups owning almost negligible physical assets despite a billion dollar valuation, the only strength they often possess is their key employees managing various departments and the workforce as a whole. The skill shortage in an organisation can provide business adversaries an undue advantage as progress may snag and overall efficiency of the organisation may dip. 

Take a case of two organisations in the same sector. The one that thoroughly assesses HR risks and incorporates Human Capital Risk Management as a core function of its overall strategy stands on firm ground. In case of attrition, this company already has employees who have been trained to hone their leadership skills to take on more important roles.  The other company that believes managing Human Capital is a mandate of the HR team only, will certainly find it hard to steer the organisation through a talent crisis. It will incur significant losses due to undermanaged employees, decreased productivity and internal resource instability till it fills the void created by attrition.

A recent study entitled 'State of Human Capital Risk in India', by CII in association with Willis Towers Watson stated that 62% companies in the country acknowledged Human Capital Risk as ‘an urgent or very important board-level concern’. However, only 1 in 3 companies had an active risk mitigation strategy in place. It was further observed that MNCs were more efficient while dealing with such situations as compared to domestic companies. The conclusion was that Human Capital Management would be a subject of significant importance in the future. 3 out of 4 organisations planned to invest additional resources in Human Capital Risk management over a period of five years. 

Risks involved in Human Capital Management cover a broad spectrum such as skill shortage, succession planning, employee insurance, ethics and behaviour, loss or violation of intellectual property, compliance of government regulation and supply chain risks. It is important to address various responsibilities for smooth Human Capital Resource management in order to avert any such risks. 

With that being said, it is necessary to devise an effective strategy for Human Capital Management and risk aversion. One of the ways could be to hold workshops on ethics and code of conduct to address ethics-related issues and to augment levels of awareness in the workspace. Leadership qualities and a holistic attitude must be encouraged in individuals for sustainable future of the organisation, while better incentives and growth opportunities should be offered to performing employees, or in this case, high performing assets for better retention. 

Another effective approach that organizations can consider is to instil a sense of ownership for work amongst prospective employees across levels at the time of recruitment. This is a unique method that differentiates out-performers from their peers. Also, organizations that foster the culture of ownership at each level have greater probabilities of outperforming the ones that might not do so. 

Further, frequent mock drills should be exercised to ensure workforce safety in case of an emergency and all employees must be given the option of attractive insurance packages. Government norms should be followed and legalities should be worked out carefully and thoroughly without leaving a room for error. While consolidating all of that, it is most important to address grievances of employees working in your organisation, while acknowledging their value and ensuring their satisfaction to drive them to generate higher output.

With top Indian companies often losing professionals in key management positions at critical junctures of their growth story, it is imperative for risk and compliance personnel to realise the significance of ‘Human Capital Management’ in an organisation. The primary objective of a business venture should be to avert risks involved with their human capital by developing a robust approach to keep risks at minimum level. 

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