Specific Challenges That the HR Department Must Address To Mitigate Organizational Risk Situations

Introduction

Risks within a company can be significantly reduced thanks to the efforts of the Human Resources (HR) division. Human resources workers in today’s complicated and fast-paced businesses face many hurdles in meeting their legal and social responsibilities. To help organizations better prepare for and respond to ethical and regulatory risks, this Risk Management Plan will pinpoint the unique obstacles human resources face. Companies can use this plan to learn about potential strategies for maintaining legal conformance and the likely results of implementing those strategies.

Legal and Ethical Dangers

Nowadays, ethical and regulatory dangers pose severe difficulties for businesses. Consequences for violating ethical and legal norms include monetary loss, harm to one’s image, and even legal action. For instance, Volkswagen’s 2015 pollution crisis cost the company billions of dollars in penalties, litigation, and settlements and badly harmed the company’s image (Darwish & Abdeldayem, 2019). Human resources divisions face several social and regulatory issues that must be addressed to reduce potential threats to the company.

Concerning fiscal hazards, HR offices must guarantee that their businesses follow all applicable financial rules and regulations. Following the rules in the finance sector is essential to avoid getting fined, sued, or tarnishing your image (Darwish & Abdeldayem, 2019). Human resource managers are responsible for ensuring that their company’s bookkeeping procedures are honest and up to code.

Businesses must follow applicable laws and standards to reduce their exposure to environmental hazards. Fines, legal action, and a damaged image are just some outcomes that can result from disregarding environmental rules. Human resources divisions ensure their company’s environmental practices are viable and aligned with applicable laws and policies.

Safety Threats HR divisions are responsible for making the workplace risk-free for workers. Accidents, injuries, litigation, and a company’s image can suffer if the workplace is insecure. Human resources experts ensure their company abides by safety laws and standards. It provides sufficient training and resources to workers to reduce the likelihood of mishaps and injuries (Darwish & Abdeldayem, 2019). Compliance with law rules and guidelines is the responsibility of the human resources section. It is essential to follow the rules to avoid getting fined, sued, or tarnishing your image. Human resources specialists ensure that their company’s legal practices are open, honest, and in line with applicable laws and standards.

Human resources perform a crucial role in risk management by finding, evaluating, and controlling risks, primarily ethical and regulatory risks, within a company. Human resources workers face many obstacles in pursuing legal conformance and ethical conduct, including financial, environmental, safety, and legal risks. Creating a code of conduct, implementing training programs, and conducting audits and tracking are all methods businesses can use to guarantee they follow the law. These strategies may boost morale and the company’s image but may also decrease output and happiness and increase the risk of judicial action, financial loss, and social harm. As a result, HR experts need to weigh the pros and drawbacks of each strategy to determine which can best reduce threats to the company.

A business can reduce its exposure to legal and social problems in many ways. Here are a few concrete illustrations:

• Create a Code of Conduct: Creating a code of conduct can help reduce potential legal and social repercussions. In order to better grasp their ethical and legal obligations, workers benefit from having a code of conduct that lays out the organization’s beliefs, principles, and policies. The code of behavior might outline proper procedures for handling issues like sexual assault, prejudice, and bribes. Employees can lessen the likelihood of judicial action, financial loss, and social harm if they abide by the code of behavior. A code of behavior can also improve an organization’s standing in the eyes of its constituents.
• The likelihood of a company’s workers failing to comply with applicable laws and regulations can be mitigated through properly implemented training programs. A training course may cover occupational health and safety policies, environmental rules, and employment legislation. In addition to enhancing performance and decreasing the likelihood of judicial action, financial loss, and social harm, training programs can help workers improve their skills and knowledge.
• The danger of judicial action, financial loss, and social harm can be mitigated through auditing and tracking, which can help spot non-compliance problems and spur action. For instance, the company’s financial records, safety procedures, and environmental policies could benefit from periodic evaluations. Also, monitoring workers’ actions can reveal potential ethical and legal dangers like secret dealing and conflicts of interest.
• Whistleblower policies protect workers who disclose wrongdoing on the job from reprisal. One option is creating a helpline or web reporting system where workers can discreetly submit infractions. The risk of legal action, financial loss, and brand harm can be mitigated by urging workers to disclose breaches so that the company can identify and resolve ethical and legal threats as soon as possible.

Before beginning any company endeavor, conducting thorough research into the possible social and regulatory dangers involved is essential. Compliance problems, legal obligations, and image risks are just some dangers that can be discovered through due research before a business enters into a collaboration or acquisition. Companies can escape potential legal trouble, financial loss, and harm to their brand name by practicing due research. These are some strategies a business can employ to reduce its exposure to legal and social issues. Each business faces its distinct challenges, so it is important to remember that risk management strategies should be carefully developed.

Potential Impact

Let us use the following two public instances to assess the effects of potential legal, safety, environmental, and financial risks. The Volkswagen (VW) pollution controversy illustrates the potential legal repercussions of installing software in diesel engines that falsifies emission tests. This practice violates environmental laws and can lead to fraud charges (Fitzgerald & Spencer, 2020). VW’s image and bottom line were hurt by the billions of dollars it had to pay in penalties, restitution, and settlements.

• Effects on a company’s risk control strategy: A company’s bottom line and public image could take a severe hit if it broke the law. Breaking the law can cost you more than just money in fees and sanctions; it can cost you the confidence of your stakeholders, market share, and income.
• Dangers to Public Safety: The detonation of the BP Deepwater Horizon oil platform in the Gulf of Mexico created a massive oil leak that killed 11 people and ruined the ecosystem. Fines, restitution, and cleaning expenses totaling billions of dollars hurt BP’s brand and bottom line.
• Effects on a company’s risk control strategy: Serious harm to the ecosystem, human casualties, and monetary and brand losses can result from neglecting safety precautions. Stringent safety procedures and emergency reaction plans must be in place to forestall mishaps and lessen their effects.
• Dangers to the Environment: Nestle was at the center of a palm oil dispute in which it was claimed the company bought palm oil from companies responsible for environmental damage, including pollution, climate change, and violations of workers’ rights (Fitzgerald & Spencer, 2020). Nestle’s image and profits hit when environmental organizations began criticizing and boycotting the company.
• Effects on a company’s risk control strategy: Reputational harm, stakeholder distrust, and judicial action are all possible outcomes of environmental hazards. Sustainable and responsible purchasing practices are crucial for reducing environmental impacts and displaying a commitment to social duty.

Dangers to Company Finances Enron’s collapse and subsequent legal action were caused by the company’s fraudulent manipulation of financial statements to conceal losses and exaggerate earnings (Fitzgerald & Spencer, 2020). The collapse of Enron cost stockholders and workers billions of dollars in wasted assets and benefits. Effects on a company’s risk control strategy: Bankruptcy, a drop in investor trust, and judicial action are all possible outcomes of financial dangers. In order to reduce financial threats and increase shareholder confidence, open and precise financial reporting procedures must be in place.

Economic volatility, regulation compliance, and image risk were the top three dangers facing CEOs in the 2013 Ernst and Young Business Pulse report. Reduced income and prosperity, legal action and penalties, loss of confidence from stakeholders, and image harm are possible outcomes of these dangers (Sancak & Loew, 2022). As a result, businesses can take steps like instituting a code of conduct, training programs, tracking and monitoring, disclosure policies, and due diligence to lessen their exposure to these dangers. These methods can improve an organization’s financial and social security by allowing it to detect and respond to possible threats more quickly (Sancak & Loew, 2022).

Different expenses connected with corporate hazards must be considered when developing a risk management strategy. These expenses can be divided into money costs and non-financial costs.

Financial Consequences: Organizational hazards can have significant financial consequences for a business. These expenses may include the following:

• Fines, sanctions, legal fees, agreements, and recompense given to impacted parties are all legal expenses.
• Operational expenses: These are the costs of resolving the issue or reducing its effects, such as repair, replacement, and cleaning costs.
• Reputation expenses allude to the loss of shareholder faith and confidence in the business, which results in a decrease in income, market share, and brand value.
• Insurance rates may rise if a business is considered a high-risk group, increasing insurance costs (Sancak & Loew, 2022).

Non-Financial Costs: Non-financial costs linked with corporate hazards are in addition to financial costs. These expenses may include the following:

• Corporate brand and reputational harm: Organizational risks can harm a company’s brand and image, resulting in inadequate media coverage, client loss, and difficulties in recruiting and keeping top talent.
• Employee happiness and productivity can suffer due to organizational hazards, contributing to poor employee morale, worry, and anxiety, resulting in reduced output and involvement.
• Loss of trust and confidence in leadership: If a business fails to handle corporate risks successfully, stakeholders may lose trust and confidence in the leadership team, resulting in a lack of support for future projects.
• Organizational hazards can affect a company’s capacity to thrive in the marketplace, resulting in a loss of economic edge.

When developing a risk management strategy, it is critical to consider both financial and non-financial expenses connected with corporate hazards (Sancak & Loew, 2022). Companies can create strategies that reduce financial losses and non-financial expenses to keep their image, brand value, and shareholder confidence.

Public Relations

This risk management strategy’s focus on public relations is warranted by the visibility of the two instances it examines. Managing public views and keeping the confidence of stakeholders can be challenging tasks when a company is in the midst of a public disaster. Negative press, public inspection, and distrust on the part of key stakeholders are all potential obstacles (Myers, 2021).

In both instances, public opinion was crucial in deciding the final results. Organizations felt the effects of public opinion when they agreed or disagreed with the outcomes of high-profile cases. The public’s impression of a company can have repercussions for the company and its partners (such as workers, consumers, stockholders, and the local community) (Myers, 2021). Impact on stakeholders, the organization’s level of transparency and accountability, the incident’s perceived severity, and the organization’s response to the crisis were all taken into account when determining public support for or opposition to decisions made in public cases. In both instances, the public eye was trained on the groups at issue, and their responses to the crises would determine how the public saw them going forward. Organizations can only handle public problems successfully if they have widespread public backing. When people stand behind a group, it can weather any storm of criticism that comes it is a way. Some things to think about if you want to win over the public:

• Organizations must be open and honest about the event, reaction, and repair efforts.
• Organizations must show they are accountable for their actions by taking stock of what went wrong and working to prevent it from happening again.
• It is essential to keep all relevant parties informed and updated during a public disaster. Frequent communication should provide consistent updates on the circumstance and the organization’s reaction to stakeholders.
• Building confidence and good connections with partners during a public disaster is essential. Companies need to address shareholder issues and provide answers quickly.

To sum up, organizations cannot afford to lose shareholder confidence or their image if they take steps to manage public relations during a public disaster. To lessen the blow of an event that has received bad press, groups need the backing of their communities. Producing good social support requires careful consideration of several factors, including transparency, responsibility, effective communication, and partner involvement.

Cultural variables also play an essential role in deciding whether a group gets support or resistance during a public disaster. Cultural standards, values, and views affected the public’s opinion of the groups engaged in the instances studied. In food poisoning, for example, societal norms concerning food safety and health significantly influenced public opinion (Appleby et al., 2021). Cultural standards and views about gender and power relations affected the public’s reaction to the workplace abuse case. We must evaluate the societal standards, values, and views of the areas where we work to apply these elements to our business. Understanding these societal variables can help us predict and handle possible obstacles. For example, suppose our business works in a town with solid cultural values centered on environmental stewardship. In that case, we must ensure that our operations reflect those values to retain good social support (Appleby et al., 2021).

During a public problem, political factors can also impact management’s choices. Political problems such as regulation conformance and government action influenced the results in the instances studied. In the instance of food poisoning, for example, government regulating agencies investigated and sanctioned the group. Government rules governing employment law and prejudice affected the result of the workplace abuse case. To apply these variables to our business, we need to consider the pertinent governmental problems in the countries where we work (Appleby et al., 2021). Understanding the political environment can help us foresee possible obstacles and create effective tactics for dealing with them. For example, suppose our business works in a highly controlled sector. In that case, we must guarantee compliance with all applicable laws to reduce the risk of government involvement during a public disaster. Building connections with important political players can also assist us in navigating possible political obstacles and maintaining positive social support.

Trends

Organizations are expected to prioritize employee health, safety, and security in the workplace in light of recent and future trends. Workplace health and safety was a significant factor in the publicly-reported instances studied. In the food poisoning situation, for instance, people’s health and safety were in danger because of the possibility of contaminated disease. Harassment in the workplace can be dangerous to workers’ well-being because it can lead to bodily injury and psychological anguish.

Risk management must account for these tendencies to ensure a secure and healthy workplace. A company’s ability to operate legally, ethically, and profitably depends on its ability to ensure the well-being of its workers and consumers. Employee happiness, client devotion, and company image could take a hit if this does not happen.

Organizations must include health and safety precautions in the workplace as part of their risk management strategy to handle these consequences. Implementing safety rules and processes, teaching workers, and creating emergency action plans are all examples of what this category encompasses. Organizations also need to be open and honest about the safeguards they have in place and keep good social support by successfully communicating with stakeholders. Organizations can reduce the likelihood of workplace mishaps, injuries, and diseases by prioritizing health and safety concerns in their risk management strategy.

There are several reasons why it is reasonable for a company to worry about their employees’ protection and security in high-risk environments:

• Compliance with the Law: Businesses must ensure a risk-free workplace for their staff. The company risks incurring legal responsibility and other adverse repercussions if this requirement is unmet (Ranasinghe et al., 2020).
• Ethics Employers have a moral obligation to provide a secure working environment for their staff. That means keeping them safe from any workplace dangers or risks that could cause bodily or mental damage.
• Improved morale in the workplace leads to greater productivity, dedication, and contentment on the part of employees. On the flip side, tension, anxiety, and poor mood are more common in workers who feel dangerous or vulnerable at work, all of which can harm productivity.
• Adverse events or mishaps at work can significantly impact a company’s brand image. This may lead to diminished revenue, bad press, and a tarnished reputation for the company.
• The monetary impact of mishaps and events in the workplace can be substantial. Loss of wages, court costs, workers’ comp suits, and hospital bills are all examples.

For these reasons, businesses must ensure their employees’ safety whenever they are exposed to danger on the job. This can be done by performing frequent safety checks, creating emergency reaction plans, and following safety policies and procedures (Sancak & Loew, 2022). This way, businesses can safeguard their legal, ethical, and financial interests while reducing the likelihood of mishaps and incidents.

Employment Laws

Many government rules and acts govern work policies in the United States. These rules are in place to safeguard workers from job prejudice, abuse, and other unjust treatment. Employers must be conscious of these rules and their possible effect on workers. Employers should be acquainted with the following essential government statutes and acts:

• Title VII of the Civil Rights Act of 1964 bans job discrimination based on race, color, creed, gender, or national origin. Employers with 15 or more workers are subject to the legislation (Shannon & Hunter, 2020). This law protects existing workers at a business from biased recruiting, advancement, and firing practices based on the protected groups mentioned in the law.
• The Age prejudice in Employment Act of 1967 (ADEA) bans prejudice against workers over 40. Employers with 20 or more workers are subject to the legislation. The effect of this legislation on existing workers at a business is that they are shielded from age-based discrimination in Employment, advancement, and firing.
• The Americans with impairments Act (ADA) bans prejudice against people with impairments in jobs, public facilities, transit, and other areas. Employers with 15 or more workers are subject to the legislation. The effect of this legislation on existing workers is that they are shielded from biased recruiting, advancement, and firing practices based on their impairments.
• The Family and Medical Leave Act (FMLA) permits qualified workers to take up to 12 weeks of unpaid leave per year for family and medical reasons such as the delivery or adoption of a child, caring for a family member with a severe health condition, or caring for their serious health condition. Employers with 50 or more workers are subject to the legislation. The effect of this legislation on existing workers is that they have the right to take approved leave without worrying about losing their Employment.
• The Fair Labor Standards Act (FLSA) sets minimum salary, extra compensation, recording requirements, and juvenile job standards for eligible workers in the private sector and federal, state, and municipal agencies (Kennebrew). Current workers at a business are promised a minimal salary and extra compensation for hours worked beyond 40 per week under this legislation.
• OSHA (Occupational Safety and Health Act): Employers are required by legislation to provide their workers with a secure and wholesome work atmosphere. All employees are subject to the legislation. Under this legislation, current workers have the right to a secure and healthy work atmosphere, and companies must provide safety instructions and tools (Michaels & Barab, 2020).
• The National Labor Relations Act (NLRA) safeguards workers’ rights to participate in collective bargaining and other coordinated actions for collective bargaining or other mutual assistance or defense (Estlund & Liebman, 2021). The legislation pertains to the vast majority of private-sector employees. Current workers at a business have the right under this legislation to organize or join a union and participate in group negotiations with their boss.

Additionally, the aforementioned federal laws and acts substantially affect a company’s present workers. Employers must follow these rules to ensure their workers are handled honestly and equally. Failure to adhere to these laws may subject the group to legal responsibility and unfavorable repercussions. As a result, companies must comprehend and follow these rules to provide a secure, healthy, and fruitful work atmosphere for their workers.

The following techniques can be used to guarantee conformance with the specified government regulations:

• Training and Education: Providing training and education on the laws and rules that pertain to the business to all workers, including management, can help guarantee conformance. Workshops, internet classes, and on-the-job training can all be used to accomplish this. This can assist workers in understanding their duties and privileges, as well as avoiding unintended infractions.
• Regular evaluations of business policies and practices can assist in identifying possible compliance problems. It is critical to ensure that all policies and practices are under relevant laws and rules. Audits should be performed at least once a year or whenever laws alter.
• Policies and Procedures in Writing: The business should have documented policies and procedures in place that describe the needs of relevant laws and rules. Employees should have easy access to these policies and procedures, which should be revised daily to represent any changes in laws or regulations.
• Monitoring and Reporting: Monitoring the workplace to ensure conformance with relevant laws and regulations, as well as reporting any infractions, can aid in preventing future transgressions and promptly settling existing ones. This can be accomplished through staff questionnaires, idea receptacles, or other contact forms.
• Consultation with Legal Professionals: Consulting with legal professionals who specialize in employment law can assist the business in staying current with changes in laws and regulations and ensuring that policies and practices are in conformance.

By adopting these procedures, the business can guarantee conformance with all relevant laws and regulations, reduce legal risks, and prevent possible fines and lawsuits.

References

Appleby-Arnold, S., Brockdorff, N., & Callus, C. (2021). Developing a “culture of disaster preparedness”: The citizens’ view. International journal of disaster risk reduction, 56, 102133.

Darwish, S., & Abdeldayem, M. M. (2019). Risk management and business ethics: Relations and impacts in the GCC. International Journal of Civil Engineering and Technology, 10(10), 489-504.

Estlund, C., & Liebman, W. B. (2021). Collective Bargaining beyond Employment in the United States. Comp. Lab. L. & Pol’y J., 42, 371.

Fitzgerald, A. J., & Spencer, D. (2020). Governmentality and environmental rights: Regulatory failure and the Volkswagen emissions fraud case. Critical Criminology, 28, 43-63.

Kennebrew, D. L. The Employment Status of the Twenty-First Century NCAA Collegiate Athlete: An Evaluation of the Fair Labor Standards Act and the National Labor Relations Act. DePaul Journal of Sports Law, 18(1), 1.

Michaels, D., & Barab, J. (2020). The occupational safety and health administration at 50: protecting workers in a changing economy. American journal of public health, 110(5), 631-635.

Myers, N. (2021). Information sharing and community resilience: toward a whole community approach to surveillance and combatting the “infodemic”. World Medical & Health Policy, 13(3), 581-592.

Ranasinghe, U., Jefferies, M., Davis, P., & Pillay, M. (2020). Resilience engineering indicators and safety management: A systematic review. Safety and Health at Work, 11(2), 127-135.

Sancak, I. E., & Loew, E. (2022). Revisiting Corporate Governance with Wirecard in the post-Enron Era. Available at SSRN 4313820.

Shannon, J. H., & Hunter Jr, R. J. (2020). The Civil Rights Act of 1964: Beyond Race to Employment Discrimination Based on Sex: The’Three Letter Word’That Has Continued to Vex Society and The United States Supreme Court. Journal of Social and Political Sciences, 3(3).