People are the backbone and personality of a business—a showcase of your organization's talent, education, experience and success. But people are also a key source of risk. Because risk management is the fundamental driver to sustainable success, understanding the various risks associated with your employee population must be a top priority for business leaders and policymakers.

Access to a systematic and consistent method of assessing people risk would be an invaluable tool in any human resources (HR) strategy and policy planning. But such a tool did not exist—until now. The Aon Consulting People Risk Index™ (PRI) is the first and only comprehensive undertaking that analyzes people risk at the global level. Designed to facilitate a quick yet thorough understanding of comparative people risk by location, the PRI helps business leaders identify sources of people risk in order to improve their overall risk management strategy.

The Starting Point

The process of assessing people risk begins with a few simple questions: 1.) What are the main sources of people risk? 2.) What are the levels of people risk at different locations of operation? 3.) What can businesses do to mitigate people risk?

It's important to keep in mind that risk associated with staff occurs at every stage of the employee life cycle.

Risks associated with hiring decisions include:

• Not finding qualified candidates.
• Hiring people who do not fit the organization culture.
• Hiring people who do not have relevant experience or capabilities.

Risks associated with employing people include:

• Losing people the company wants to keep.
• Paying too much or too little, or for the wrong things.
• Creating employment rigidities that stifle the business.

Risks associated with redeploying or letting people go include:

• Moving people into new jobs, new organizations or new locations.
• Layoffs, terminations or organization restructuring.
• Incurring costs after people are gone.

Some risks are created by a company's policies and practices while others are related to the operating location. The risk of failing to attract qualified candidates, for example, is both an operational and location risk. A company's poor hiring practices may create the risk. Perhaps the company does not have an effective means of identifying and selecting candidates. By putting in place effective recruitment policies and procedures, a business can overcome the risk—but only if qualified candidates are available in the location where the company is operating. The risk persists despite the best hiring policies and practices if qualified candidates simply are unavailable in a given market.

Although understanding risk associated with both operation and location is critical to business success, quantifying and comparing people risk by location must be the first step toward successfully managing people risk. Global corporate HR policies and practices need to take into account the local conditions and risks in each location where a company operates. While this is well-understood by globally experienced HR practitioners, assessing the risks associated with people is often ad hoc, subjective and nonquantifiable. The result can be a confusion of the underlying and full business risk of operating in a given location.

Measuring People Risk

People risk associated with a location affects both the profile of the workforce and the business results of companies operating in that location. Plus, the source of the risk can be at either a macro-level, thus affecting everyone in that location, or the risk can be at a micro-level and affect specific types of business operations.

Aon Consulting identified 25 factors grouped into five areas of people risk by location:

Environment: Examines risk factors associated with labor supply, economy and society.

Government Support: Analyzes risk factors related to government policies and practice, which can either help or hinder the management of people in that location.

Education Levels: Measures risks associated with finding qualified professionals in a specific location.