Ultimate Performance: Measuring Human Resources at Work

Categorizing Risks—Type and Source

Risks do not occur in isolation and can generally be grouped and allocated to categories or domains. In the ERM framework, risks can be can be allocated to one or more of several categories (Walker, Shenkir, and Barton 2002).

Hazard Risk: Risks that are insurable, such as natural disasters; various insurable liabilities; impairment of physical assets; terrorism.

Financial Risk: Risks associated with an organization’s ability to raise capital, maintain access to capital, and contracting issues.

Strategic Risk: This category includes risks that impact the growth of an organization. Examples include risks related to strategy, political, economic, regulatory, and global market conditions; it could also include leadership risk, brand risk, and changing customer needs. This category also includes reputation risks that center on performance expectations related to customer and community relations.

Human Capital Risk: Risks associated with the acquisition, management, and maintenance of a human workforce. These risks include worker compensation, unionization, turnover, absenteeism, strikes, workplace violence, harassment, and discrimination. Environmental issues related to safety and security, plus occupational and environmental hazards, are also included in this category.

Operational Risk: Risks related to an organization’s systems, processes, technology, and people. This is risk associated with the operation of the business itself, including those associated ...