Risk Insider: Lance Wright

The HR and Risk Management Nexus

By: | March 28, 2017 • 3 min read
Lance Wright is Partner and CEO at Lance Wright & Associates. He has decades of global business experience, with the bulk of his career spent as an international oil and gas executive. He can be reached at [email protected]

Business leaders, CFOs, risk managers and HR professionals should continually review how the organization approaches people-related risk management issues. Today, as part of their critical strategic business processes, successful organizations are constantly looking for ways to better understand the nexus between HR — the human resources of an organization — and effective risk management. Here is a quick review of the key things to consider.

Develop a cross function partnership.

An effective enterprise risk management program invariably focuses at some point on the big chunk of an organization’s financial resources associated with the pension, insurance, savings and other benefits plans that the HR function usually manages and administers. As a result, a partnership is developed in many organizations between HR, the finance organization and the risk management function to make sure that the risks associated with these HR plans and programs are well understood and properly addressed.

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Continually rethink HR-related risks.

This cross function partnership makes sure that advancements in technology and computing power are used to identify, analyze, model and ameliorate not only the HR-related financial risks in the organization but also those that emerge from the behavior of people.  This continual rethinking of the HR and risk management nexus often leads to increased understanding of the events and actions that can impact, or be done by, the people in an organization.  From planning for pandemics to identifying and protecting against physical and information security vulnerabilities, forward-thinking organizations make sure there is a coordinated HR and risk management review process overseen by senior management.

Understand the insider threat.  

Well-run organizations that have been rethinking the HR and risk management nexus understand that the actions of its human resources, whether malicious or inadvertent, can represent one of the greatest potential risks to the bottom line. They understand and guard against the “insider threat,” the employee who may, for example, introduce a virus into an organization’s information system through an infected thumb drive. They know that even if unwittingly done, this sort of action by an employee can bring an enterprise’s operation to its knees.

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Look for hidden HR-related risk issues.

Thoughtful organizations know that despite the progress they have made in rethinking the HR/risk management nexus, there are always seemingly people-related processes that in actuality are really about organization risk.  For example, many organizations think of succession planning and leadership development as solely an HR-related process.  However, progressive organizations that have been rethinking the HR and risk management nexus believe succession planning should be viewed as a process designed to prevent the risks associated with not being able to fill vacancies in critical positions with the right people. They seek out other so-called HR processes that may really deal with risk.

The continual review of the HR and risk management nexus is well underway in top-notch organizations. More organizations should follow suit.

More from Risk & Insurance

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2017 RIMS

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.
By: | April 19, 2017 • 2 min read
Topics: Cyber Risks | RIMS

“The sky is not falling” when it comes to cyber security, but the threat is a growing challenge for companies.

“I am not a cyber apocalyptic kind of guy,” said Gen. Michael Hayden, former head of the Central Intelligence Agency and National Security Agency, who currently is a principal at the Chertoff Group, a security consultancy.

Gen. Michael Hayden, former head of the CIA and NSA, and principal, The Chertoff Group

“There are lots of things to worry about in the cyber domain and you don’t have to be apocalyptic to be concerned,” said Hayden prior to his presentation at a Global Risk Forum sponsored by Lockton on Sunday afternoon on the geopolitical threats facing the United States.

“We have only begun to consider the threat as it currently exists in the cyber domain.”

Hayden said cyber risk is equal to the threat times your vulnerability to the threat, times the consequences of a successful attack.

At present, companies are focusing on the vulnerability aspect, and responding by building “high walls and deep moats” to keep attackers out, he said. If you do that successfully, it will prevent 80 percent of the attackers.

“It’s all about making yourself a tougher target than the next like target,” he said.

But that still leaves 20 percent vulnerability, so companies need to focus on the consequences: It’s about response, resiliency and recovery, he said.

The range of attackers is vast, including nations that have used cyber attacks to disrupt Sony (the North Koreans angry about a movie), the Sands Casino (Iranians angry about the owner’s comments about their country), and U.S. banks (Iranians seeking to disrupt iconic U.S. institutions after the Stuxnet attack on their nuclear program), he said.

“You don’t have to offend anybody to be a target,” he said. “It may be enough to be iconic.”

The world order that has existed for the past 75 years “is melting away” and the world is less stable.

And no matter how much private companies do, it may not be enough.

“The big questions in cyber now are law and policy,” Hayden said. “We have not yet decided as a people what we want or will allow our government to do to keep us safe in the cyber domain.”

The U.S. government defends the country’s land, sea and air, but when it comes to cyber, defenses have been mostly left to private enterprises, he said.

“I don’t know that we have quite decided the balance between the government’s role and the private sector’s role,” he said.

As for the government’s role in the geopolitical challenges facing it, Hayden said he has seen times that were more dangerous, but never more complicated.

The world order that has existed for the past 75 years “is melting away” and the world is less stable, he said.

Nations such as North Korea, Iran, Russia and Pakistan are “ambitious, brittle and nuclear.” The Islamic world is in a clash between secular and religious governance, and China, which he said is “competitive and occasionally confrontational” is facing its own demographic and economic challenges.

“It’s going to be a tough century,” Hayden said.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]