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RISK MANAGEMENT IN HR AND ITS ROLES

 

 RISK MANAGEMENT IN HR AND ITS ROLES

 

Abstract :

This paper aims to provide an introduction to some of the key risk management roles, issues and processes. This paper is not intended to be an all-singing, all dancing description of the risk management industry. Rather, we hope that it provides a summary of the themes and practices that we use in risk management. This may enable actuaries to understand how risk management ideas and processes can addvalue to their organisation and how they can use these concepts in their work.

DEFINITION OF RISK MANAGEMENT:

“Risk is the threat that an event or action will adversely affect an organisation’s ability to maximise stakeholder value and achieve its business objectives and business strategies. Risk arises as much from missed opportunities as it does from possible threats.”

Basically, risk management is the sum of all proactive management-directed activities within a program that are intended to acceptably accommodate the possibility of failures in elements of the program. “Acceptably” is as judged by the customer in the final analysis, but from an organization’s perspective a failure is anything accomplished in less than a professional manner and /or with a less-than-adequate result. The key words are:

It is possibilities that are being accommodated. It is management’s job to do the planning that will accommodate the possibilities. The customer is the final judge, but internal goals should be to a higher level than customer expectations.

WHAT IS RISK MANAGEMENT?

Risk Management is the process of protecting an organization from financial harm by identifying, analyzing, financing, and controlling risk at the lowest possible cost. Effective Risk Management is a progression of actions that are taken with the purpose of minimizing losses or injuries within the organization. Ascendant HR believes that your employees are your company’s most valuable resource.

A well-designed insurance and risk management program allows you to use your financial and human resources to pursue your company’s strategic goals.

ROLES OF RISK MANAGEMENT:

There are two types of Roles in Risk Management, They are:

1)      People are a source of risk,e.g., shortage of employees, people doing sloppy work, an employee refusing to take on additional responsibility or a key employee leaving two months after completion of a one-year training program.

2)      People are important in handling risk, e.g., people using their ingenuity to solve unexpected problems, employees going the extra mile for the good of the organization, a key employee redesigning her own job to avoid unnecessary delays in getting work done, or an employee persuading a talented friend to apply for a position in the business.

 RISK MANAGEMENT OVERVIEW:

The goal of Risk Management is to identify, assess, and resolve risk items before they become threats to a specific project or to the organization as a whole. Risk Management plans should include short-term and long-term risks to project schedules, costs, and the functionality, adequacy and quality of project deliverables. Risk Management is an integral part of the overall quality assurance effort necessary to minimize the major sources of rework, schedule and cost overruns, and performance and quality degradation. Risk Management consists of the following two broad categories of activities: risk

Assessment and risk control.

 

THE HUMAN RESOURCE MANAGEMENT AND RISK MANAGEMENT INTERFACE:

Like risk, human resources are pervasive in the business. Human resource management

is most effective when integrated with decision making throughout the business. This leads to recognition that each production, financial and marketing decision has a human component or influence. Which choice is made, how the decision is carried out, the follow up and monitoring depend on people. Isolating management team and employee issues from production, financial and marketing management frustrates people and creates unnecessary risk in a business enterprise.

To understand fully how human resource management and risk management are

Interrelated one must understand human resource management. It is the staffing, training,

development, motivation, and maintenance of employees to help accomplish organizational goals. Effective human resource management also helps employees accomplish their career goals.

Human resource management is a process that can be broken down into specific activities:

1)      Job analysis and writing job descriptions

2)      Hiring

3)      Orientation and training

4)      Employer/employee interactions

5)      Performance appraisal, compensation and discipline

1) Job analysis and writing job descriptions :

The first activity is job analysis and writing job descriptions. Job analysis is

determining the duties and skill requirements of a job and the kind of person to fill it. The

emphasis is on what the farm needs rather than on who wants to be promoted or who could be easily hired. The tasks that must be carried out to accomplish the firm’s goals determine duty and skill requirements. Job descriptions summarize for both employees and employers just what a job entails: job title, duties, compensation, and skills, knowledge and abilities to do the job. In family farm businesses, job descriptions for family members often include both management and labor responsibilities. Such a combination of responsibilities makes job analysis and job descriptions more not less important in small businesses.

 

2) Hiring:

Is the next human resource management activity. The objective of hiring is to

staff each job with a person who can succeed in the position. In today’s exceptionally tight labor market, hiring is one of the most difficult human resource activities. The position must be described carefully and creatively to potential applicants. From among the pool of applicants,people must be carefully chosen if they and the employer are to have a successful relationship.

 

3) Orientation and training:

The next activity after hiring is orientation and training. Orientation socializes new

people to the business. It introduces them to the firm’s mission, its history and its culture. It gives them the information essential for getting off to a good start. Training and experience give the employees the knowledge, skills and abilities necessary to succeed in the position.

 

4) Employer/employee interactions:

Day-to-day employer/employee interaction includes leadership, motivation, and

communication that build on hiring, orientation and training. Employer/employee interaction cannot make up for an ill-defined job, having hired the “wrong” person or inadequate orientation and training.

 

5) Performance appraisal, compensation and discipline:

The last three activities are closely related: performance appraisal, compensation and

discipline. Performance appraisal is the continuous assessment, in cooperation with the

employee, of how she or he is doing relative to the standards and expectations laid out in the job description and follow up training. Performance appraisal also includes dentifying with the employee whatever corrective action may be necessary and steps by which the employee can advance his or her career.

Compensation includes the monetary and non monetary rewards received by employees.

The management team and employees carefully choose these rewards. The rewards need to be feasible for the organization while helping satisfy employee needs.

Discipline is giving each employee expectations, rules, policies and procedures and then

working with the employee to get behavior consistent with employer expectations.

Human resource activities lead to four important implications for risk management.

 

1)      These activities are necessary to keep human resources in harmony with           the       riskmanagement tools adopted by the management team. Risk management decisions are carried out by people. Having the “right” people in place, trained, motivated and rewarded are essential to success in risk management.

 2)      Human resource calamities, e.g., divorce, chronic illness, accidental death, can

hamper carefully made and appropriate risk management decisions. Risk management should anticipate the likelihood of human resource calamities. Human resource contingency planning needs to be an integral part of risk management.

 3)      No management team stays together indefinitely. Every farm will eventually have

different managers or be out of business. Management succession is a significant source of risk.Human resource considerations, plus legal and financial considerations, directly affect success in management succession and thus risk management. Management succession requires each of the human resource management activities: job analysis, job descriptions, selection, training, interaction, performance appraisal, compensation and discipline.

 

4)      Human resource performance evaluation should be tied to risk management.

Risk management strategies are carried out through people. Human resource failures can cause the best planned risk management strategies to fail. Risk management depends on explicit duties being specified in managers’ job descriptions, delegation of power and authority to manage risk following indicated guidelines, and responsibility at the action level of risk management.

 

Understanding these activities helps explain the relationship between human resources and risk.Failure to successfully carry out these activities increases risk and penalizes the organization by not taking advantage of what its people could be contributing.

 

MANAGER’S SKILLS :

 

The effective integration of Risk management and human resource management requires

that managers have certain skills. Most important are:

 

1)      Leadership

2)      Communication

3)      Training, Motivation

4)      Conflict Management and Evaluation.

 

1) Leadership:

 

Every human resource manager has leadership responsibility. No group of people comes

close to its potential without effective leadership. Planning, organizing, staffing and controlling can substitute to some extent for leadership. Delegation of authority and responsibility and other tools for empowering employees decrease the need for leadership. Motivation, trust and careful development of procedures and policies are also helpful. Still, each ship needs a captain. Some leadership is necessary.

 

 

2) Communication:

 

Communication is an essential skill for effective human resource management. In

human resource management, clear messages, listening and use of feedback are especially important. Interpersonal relations, interviewing in the hiring process, building rapport in the management team and with employees, orientation and training, performance interviews, conflict resolution and discipline, all require communication. Mediocre communication skills tremendously complicate these activities.

 

3) Training, Motivation :

 

Training is helping people learn. Effective training requires teaching skills, an

understanding of how adults prefer to learn, patience, communication, a systematic approach and evaluation of whether the training has been effective.

 

Motivation of employees challenges every manager. Employee motivation helps the

organization accomplish its goals while also helping workers accomplish their career goals. No motivation recipe guarantees employee motivation. Nevertheless, some managers are more effective than others in developing a work environment in which employees are consistently motivated. These managers use a combination of: understanding and satisfying employee needs, compensating fairly, making it possible for employees to do their jobs with minimum frustration and treating employees equitably. The skill to motivate employees is nebulous yet real. The employers who are best at it have usually worked long and hard to develop the skill. Attributing the ability to motivate people to nothing more than a natural gift understates how hard the best human resource managers work to develop this skill.

 

 4) Conflict Management and Evaluation :

 

Conflict is inevitable in farm teams: among employees, between employees and the management team and among the management team. Managers must learn to deal with conflict rather than avoid it. Avoiding the conflict and its causes simply postpones the pain and agony that come from personnel blowups. Conflict management strategies provide the management team positive steps for addressing the conflict. Effectiveness with the strategies is an essential skill.

 

Most employees have a fervent desire for Evaluation, i.e., information about their performance. Many supervisors find it extremely difficult to share performance evaluations in an honest and helpful manner. Employees dread poorly done evaluations and evaluation interviews. Supervisors lacking evaluation skills combat their frustrations by postponement, inflated evaluations and vague communication. Both supervisors and employees need training in evaluation for it to be useful and pleasant for both parties.

 

 CONCLUSION:

 

Managers’ paradigms, understanding of human resource management and human resource skills determine the success they will have with people. Like the rest of risk management, blaming others for management shortcomings neither solves problems nor provides escape from the problems. The good news is that managers can make human resource management one of their Strengths. The result will be better risk management, more effective management and greater satisfaction from working with people.

 

 

Article by:

 

X.Queen Shanthana Mary

M. Phil Scholar,

Department of management studies & research,

Karpagam University,

 

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