Ultimate Performance: Measuring Human Resources at Work

Chapter 5. Employee Contribution to Risk

Risk has been defined as the chance of something happening that will have an impact upon objectives. Risk management is an attitude of mind that should pervade all levels in an organization. It needs to be undertaken on an ongoing basis and in a proactive manner. Without proper risk management, an organization is less likely to achieve its objectives in an efficient and effective way. As firms look to optimize corporate value, the role and need for effective risk management have grown. Of all the organizational factors, the role of the employee in risk impact is among the most complex.

Employees significantly impact the risk profile of a firm, primarily in the category of operational risk, and more specifically in the areas of worker safety and service provision liability. Organizations that are actively seeking to manage risk to an efficient risk frontier can use a number of tools to optimize their risk profile, including the transfer and mitigation of risk. Risk mitigation efforts that focus on current and future employees can return value in the form of reduced costs well beyond the costs incurred in implementing these mitigation efforts. Employee selection should focus on identifying employees who are more likely to work safely, follow processes, and act conscientiously, and are less likely to be negligent, act carelessly, or manifest deviant behaviors such as malingering. This can be a cost effective tool in reducing employee related ...