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Mitigating Human Resources Risks

Mitigating Human Resources Risks. Human Assets Can Make Your Business Fly – Or Sink. The “human factor” is the common element in most risk and crisis scenarios 9 out of 10 risks or security problems are caused by people inside your organisation. Business Risks on HR Side.

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Mitigating Human Resources Risks

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  1. Mitigating Human Resources Risks

  2. Human Assets Can Make Your Business Fly – Or Sink • The “human factor” is the common element in most risk and crisis scenarios • 9 out of 10 risks or security problems are caused by people inside your organisation

  3. Business Risks on HR Side • Organised crime • Confidentiality breaches • Accidents • Mismanagement • Service deterioration • Contractual risk • Fraud • Distribution scams • Legal disputes • Industrial espionage • Intellectual property theft • Workplace theft • Harassment & discrimination claims • Corruption • Backlash vs. workouts • Sabotage • Kidnapping • Extortion • Unsecure data & communications • Workplace violence (including violence against executives and facilities)

  4. Asian Labor Environment • Asia is a growth area representing a major source of new professionals… • …Yet it is also a major center of labour ethics violations • Unethical sources include: child labour, sweatshop labour, forced labour, prison labour • Cultural differences – “us vs. them” – make multinational corporations vulnerable

  5. HR-related Crime Scenarios • Fraud, industrial espionage, intellectual property theft and piracy, corruption, sabotage: staff are often involved • Data & communications are at risk from employees, not just from external enemies • Organised crime may recruit your staff, or plant stooges

  6. HR-related Crime Scenarios • Workouts & downsizings can spark backlashes, violence, asset stripping, hostage taking • Product tampering extortionists are often insiders • Kidnappers rely on insider information

  7. Common Traits of Companies That Get Into Trouble • Frequently rotating managers • Poor public and corporate records • Migration of cliques – “tribal loyalty” • Corporate culture not instilled • Neglect of due diligence practices • Internal controls not firmly enforced • No corporate HQ connection with key staff

  8. Ongoing HR Risk Mitigation Employee Integrity Program (EIP)

  9. Employee Integrity Program(EIP) – Why Have One? • Your organisation needs: • Honest employees • Effective internal controls • Strong & visible deterrents

  10. Employee Integrity Program(EIP) — Why Have One? • An effective EIP will help you: • Reduce risks to your reputation • Protect your resources • Improve your bottom line • Build your company’s value

  11. Employee Integrity Program(EIP) — Why Have One? • An effective EIP will also help minimise losses relating to: • Internal fraud & theft • Negligent hiring • Workplace violence • Workers’ compensation claims • Non-performance of duties • Non-compliance

  12. What Goes Into An Employee Integrity Program (EIP) • Background checks on senior or sensitive employees • Professional pre-employment screening • Monitoring and surveillance • Spot checks on ethics compliance • Substance abuse testing (USA)

  13. What Goes Into An Employee Integrity Program (EIP) • Risk analysis of your organisation • Whistle-blowing & complaint mechanisms • Structured exit interviews • Strict standard operational procedures to maintain control over your organisation

  14. Pre-Employment Risk Mitigation

  15. What is the most common type of fraud in the world? Answer: Résumé fraud

  16. Pre-Employment Screening • LEVEL 1: Light Screening • LEVEL 2: Medium Screening • LEVEL 3: Full Screening • All companies should conduct thorough background checks before hiring. Three different levels of pre-employment screening are available to fit your needs.

  17. Pre-Employment Screening • When considering pre-employment screening, consider the following: • Find out not just where and when, but why the candidate left the previous job. • Explanations of employers and copies of resignation letters should not be taken at face value

  18. Pre-Employment Screening— Three Levels of Scrutiny LEVEL 1: LIGHT SCREENING Level 1 checks include: • Verification of last job • Verification of highest degree obtained • Verification of address • Criminality check • Verification of ID number (many forgeries)

  19. Employment Screening —Three Levels of Scrutiny LEVEL 2: MEDIUM SCREENING Level 2 checks include all of the checks in Level 1, plus: • Verification of past 5 years employment • Research into past financial behaviour

  20. Pre-Employment Screening — Three Levels of Scrutiny LEVEL 3: FULL SCREENING Level 3 checks include all checks in Levels 1 & 2, plus: • Verification of 10 years of employment • Discreet in-depth reputational interviews • Litigation checks

  21. Pre-Employment Screening — Three Levels of Scrutiny LEVEL 3: FULL SCREENING • Firms owned, licences held, discipline actions • Media research • Property asset research • Research into liens, bankruptcy records

  22. Mitigating HR Risks in Downsizing Scenarios

  23. “Getting Even” Downsizing, restructuring, liquidation, exit time, firings, non-payment of bonuses, and similar actions often lead to: • The “Getting Even” syndrome • “Tribal loyalties” that outweigh corporate loyalty • Hidden liabilities, pensions, redundancy pay, other issues

  24. “Getting Even” Additional threats include: • Asset stripping, sabotage, theft, embezzlement • Poison letters, dirty tricks • Theft of trade secrets, intellectual property theft • Attacks on computer systems • Pre-departure “gifts” – including computer viruses • Physical violence, hostage taking

  25. Mitigating HR Risks in Downsizing Scenarios • Have effective business controls in place • Control systems must be able to deter, detect & respond to internal threats • Have early warning systems to spot risks • Carry out risk & threat assessments before downsizings, firings or “bad news announcements”

  26. Mitigating HR Risks in Downsizing Scenarios Other tactics to mitigate risks: • Enhance management-staff communications • Enhance crisis management planning • Have contingency plans to deal with hostile employees or ex-employees

  27. Mitigating HR Risks in Downsizing Scenarios • Enhance security to protect people & premises • Prevent unauthorised electronic access • Protect & backup all operating, financial, and data processing systems & crucial assets

  28. Mitigating HR Risks in Downsizing Scenarios • Monitor departing staff on the way out • Who are the staff most likely to stir trouble? • Check employee computers for hostile plans • Check ex-employees’ computers for erased files

  29. And Upsizing Scenarios —They Also Pose HR Risks • Growth requires reviews of security & HR risks • The “feel good” environment of expansion & high turnover growth can blind a company toward its risks • Businesses outgrow existing controls — that’s when security gaps appear

  30. And Upsizing Scenarios —They Also Pose HR Risks • Traditional organisational, financial & security controls may be inadequate protection against disaster • Business processes can break down, and organisational mismanagement ensues

  31. Case Studies Background checks reveal alarming discrepancies. The following are based on true cases.

  32. Case Studies CASE 1: Forgeries and Fakes • The applicant claimed to hold a university degree • The university named by the candidate reported that the applicant’s degree was ‘fake and forged’ • A reference letter, apparently signed by the university’s Deputy Controller of Examination, was also ‘fake and forged’ • A second degree (BBA) claimed by the applicant was never conferred, and the claim was false

  33. Case Studies CASE 2: False Employment Record • A post-employment verification is conducted on a current employee • One of the employee’s previous employment records is revealed as fake— she had never been employed by the company, as claimed • For the rest of her employment details, there were conflicts in claimed job titles, duties and salaries

  34. Case Studies CASE 3: Fraud Alleged by Former Employer • When contacted, an applicant’s previous employers reported that the applicant had been terminated due to cash embezzlement, harassment and workplace violence • A second employment verification revealed this termination, and the fact that the employee caused a financial loss to his employer

  35. Case Studies CASE 4: Fake Reference Letter • Applicant provided a reference letter from her previous employer • This employer was contacted and shown the reference letter • The organization revealed that the applicant had never been employed by them, and the letter she had provided was a fake

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