Lack of HRDs on risk committees a danger for companies

There is a lack of continuity between the way companies publicly acknowledge the importance of human capital in their risk analysis, and how they manage their associated leadership risk, a white paper has argued.

The white paper on leadership risk management, written by Armstrong Craven commercial director Alison Ettridge, found that while more FTSE 100 companies are identifying that human capital poses a performance and organisational risk, few have representation from a chief human resources officer on either their boards or risk committees.

The majority of risk committees in FTSE 100 companies are chaired by non-executive directors, according to the research. None have had exposure to leadership risk, meaning they lack experience in dealing with this specific threat.

More companies than ever have a chief risk officer (CRO), but this is still concentrated in few sectors, mostly regulated industries such as financial services, energy and healthcare, the paper says.

However, most CROs have no past exposure to human capital management, meaning any mitigation strategies could lack effectiveness.

“Companies are increasingly identifying human capital as a risk,” explained Ettridge, and while things are starting to change in that there are more HR representatives on executive committees, the pace of change is “actually very slow”.

This article originally appeared in HR Magazine on 16th February 2015 and can be viewed here.