Human resources leaders face an increasingly complex set of overlapping and conflicting challenges, including managing global benefits, ensuring that resources are in place to support growth plans, improving staff skills to increase customer retention, delivering staff development and succession planning, and many more.

While they may not see it in these terms, juggling those business priorities means HR leaders are constantly managing human capital risk (HCR). The benefit of adopting a risk management approach is that it can deliver meaningful short- and long-term risk mitigation strategies to the organization, with proven effectiveness. This moves it out of the administrative arena and differentiates HR strategically, seen by many as key to human resources adding near-term value to the organization.

Aon's five steps to a successful risk management plan:

1. Identify the key risks.
2. Assess them.
3. Evaluate their impact.
4. Mitigate them where feasible.
5. Monitor the changing risk picture.

What does being a human capital risk manager mean in practical terms when it comes to dealing with some of the biggest HR challenges facing most organizations?

taming the complexity and cost of EMPLOYEE BENEFITS

The increasing cost of benefits is already one of the largest human capital risks most organizations face, and as benefit offerings grow in complexity and cost, the risk is likely to increase.

Identifying and understanding the risk is the place to start, for instance, through a benchmarking study to understand what programs are offered, at what cost and in which territories. For international organizations, gathering this information has become easier using the Web, which makes it possible to aggregate, track and analyze the data centrally, without disrupting decentralized delivery.

With central oversight, you can evaluate program cost and offerings to make sure your global plans are aligned with your organization's objectives. Corporate compliance is normally an important goal, and a country-by-country regulatory compliance review assists in mitigating the financial risks associated with benefits and HR regulatory non-compliance.

Reviewing and analyzing benefit data can also reduce the cost of benefits. Whether you are evaluating the investment performance of your pension provisions or predicting future health costs based on claim data, data analysis supports decisions and helps organizations manage cost in challenging economic times. One effective approach to mitigate the risk is implementing employee wellness programs, which are increasingly common. Wellness programs include health screenings and coaching, programs to help people stop smoking, and 100 percent coverage for preventive services, among others. Employers offer a number of different incentives to encourage employees to participate.

Effective benefits management can also directly mitigate the risks associated with attracting and retaining talent. Simply communicating the total rewards package being provided significantly reduces the risk of turnover, yet less than 20 percent of employers actually do it, and only 13 percent incorporate the value of the employment deal in their overall communication strategy. It is extremely important to make sure that the company goals and missions are embedded in whatever communication strategy you choose. Many organizations take a short-sighted approach, viewing employee communication as an expense rather than an investment to mitigate the risk of turnover. Human capital risk managers can position the return on this communication investment through reduced employee turnover cost.

Taking a risk-management approach to retirement benefits reveals both risk and opportunity. The risk is that with the number of pension plans continuing to decline, and the proportion of defined contribution plans increasing, employees are not making suitable financial preparations for their retirement. That creates both financial and brand risks for the firm, which can be mitigated by addressing inertia and procrastination among employees. The opportunity is that ensuring employees are taking appropriate steps actually builds brand equity, with prepared retirees taking active roles in customer succession and brand advocacy and paving the way for the next generation.