Article
2 minute read 12 December 2022

Are organizations actively managing the full spectrum of risks associated with the workforce?

Tight labor markets and a shortage of skilled workers are just the tip of the iceberg for leaders in assessing and managing workforce-related threats to their organization.

Joseph B. Fuller

Joseph B. Fuller

United States

Michael Griffiths

Michael Griffiths

United States

Reem Janho

Reem Janho

United States

Among the many challenges C-suite executives and boards have faced over the last decade, one that remains constant is sustaining a competitive workforce. Accelerating change related to technology, demographics, and attitudes about work; the advent of gig platforms; disruption in global supply chains: those factors and others are making it harder for many corporations to secure and retain a competitive workforce. That can imperil not only an organization’s financial and operational performance but also its reputation and brand.

We wanted to understand how leading companies were managing those risks. We surveyed 875 US C-suite and executive leaders and board members on nine common categories of risk organizations often face and how they currently prioritize workforce risk. The results: Workforce risk ranked second, behind only operational risk, as companies’ top priority. Yet the results also indicated that most companies consider only a few of the 11 specific areas of workforce risk we inquired about and further revealed a major governance gap. In particular, only 10% of companies surveyed indicated that their boards provide guidance or have oversight over five or more workforce risk areas tested—a noteworthy finding given the increasing regulatory interest in environmental, social, and governance (ESG) topics and the impact workforce issues can have on corporate reputation.

C-suites and boards surveyed seemingly hold a view of workforce risk that is consistent with concerns firmly rooted in the past. When presented with an extensive list of possible workforce risks (across 17 external and 11 internal sources) and asked to rank the top five workforce risks that threatened their business objectives, the most frequent response related to potential damage to their organization’s brand and reputation. Issues such as reducing turnover, increasing wages, and ensuring skills availability were less frequently cited despite their being the subject of a great deal of research published on the future of work.

What is workforce risk?

Workforce risk should be defined as any workforce-related threat to an organization’s operational, financial, and reputational outcomes, including, but not limited to, such factors as:

  • Skills and talent availability
  • Ability to address changing workforce expectations (such as social responsibility)
  • Disruptions to the location of the workforce (such as war or remote work)
  • Workforce-related regulations and compliance
  • Amplified voice of individual workers (such as unionization, worker activism, and negative media)
  • ESG and diversity, equity, and inclusion
  • Workforce trust, purpose, and mission
  • Ability to plan for and deploy workers against evolving organizational needs
  • Workforce well-being, compensation, and rewards
  • Workforce data and technology (such as responsible use of workforce data and artificial intelligence, cybersecurity, and data privacy)

While recent and anticipated changes to workforce-related reporting requirements have raised the profile of workforce with many leaders,1 few seem to have started viewing workforce risk more broadly. Many sophisticated companies employ risk management tools to help understand the consequences of scenarios that might affect the price, availability, or quality of resources critical to achieving their strategic objectives. Our research strongly suggests that many companies are not applying risk management disciplines while managing their workforce,2 despite the growing threat of labor shortages, skills shortages, growing rates of voluntary turnover, and the emergence of employment alternatives in the gig economy.

What are organizations with more robust practices doing to better understand, measure, monitor, and address workforce risk? How does the business performance of those organizations differ from others? We explore these questions, and more, in our upcoming report.

  1. US Securities and Exchange Commission, “SEC adopts rule amendments to modernize disclosures of business, legal proceedings, and risk factors under regulation S-K,” press release, August 26, 2020.  View in Article
  2. Deloitte 2022 Workforce Risk survey.

    View in Article

The authors would like to thank Sue Cantrell, Zac Shaw, Kalpita Ainapure, and Jay King for their insights and contributions to the article.

Cover image by: Natalie Pfaff

 

Deloitte Consulting

Deloitte Consulting LLP’s Workforce Risk supports organizations in evaluating and understanding their exposure to workforce-related risk, and further develop strategies and solutions to mitigate and manage the potential adverse impacts of those risks on financial, operational, reputational, and regulatory and compliance outcomes of organizations and their workforce. 

Michael Griffiths

Michael Griffiths

Principal | Deloitte Consulting LLP
Reem Janho

Reem Janho

Principal, Deloitte’s Workforce Transformation practice

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