The rise of people risk due to coronavirus and how firms are responding

In a recent survey, the world’s largest operational risk association, ORX, found that People risk has shot up in the rankings of what is most concerning to its 100+ members. People risk appeared in the top 3 risks of their ‘Covid Risk Review’ survey, compared to 11^th place in a similar risk horizon survey released just a few months before the pandemic hit.

The survey raises a myriad of issues being faced by businesses regarding their people in the fallout of coronavirus.

Health and safety implications:

One of the key concerns was that employee health and safety is more critical than ever before. Staff are either working remotely in places that the organisation does not own and therefore cannot control, or in office environments that require additional health and safety measures. As with many other industries, financial service organisations are concerned with being faced with regulatory sanctions or litigation from workers who fall ill on company premises when health and safety measures are not correctly implemented. For this reason, a very cautious and thoughtful strategy is being taken to ‘return to the office’.

“This is particularly challenging in litigious cultures like the US, where class actions are more commonplace,” said ORX Director of Research & Information, Luke Carrivick.

In a meeting to consider the results of the survey with senior leaders from ORX member organisations, the issue of extending the office into people’s homes and the additional pressure that puts on the business to ensure a safe and healthy working environment was discussed:

“As the lines blur between work and personal life, what happens at home is suddenly our responsibility to an extent it never has been before,” commented one Head of Operational Risk.

Wellbeing and development of staff:

Survey respondents expressed concern that the effects of lockdown and the subsequent anxiety of returning to shared office spaces will cause long-lasting impacts on people’s emotional wellbeing. Many respondents also raised how challenging it is to train, develop and retain staff, or to help them feel affiliated with company culture when working remotely.

Carrivick said: “Firms are a great deal more focused on the mental health impacts of employees being forced to work from home for such a long period of time, and what the long-term sustainability of this is. Many of our 100+ members are therefore enhancing their flexible working arrangements, implementing virtual social activities, and making changes to their policies in order to reduce the impact of the pandemic on people’s mental health.”

A senior leader also stated that their organisation had created a new “Chief People Officer” role to elevate the importance of the HR function at such a challenging time for their employees.

The impact of people on other risks

As well as being a risk type in its own right, people are also seen a significant driver for other risks that featured in the top 5 risks banks and insurers across the world are concerned about. For example, Transaction, Processing and Execution – the risk of increased employee errors – came in at the 3rd top risk in the survey.

“You’re more likely to make mistakes when you’re stressed, unhappy or unable to concentrate due to other commitments such as childcare, so people are a big driver for transaction and processing errors,” commented Carrivick.

Cyber & Information Security risk, which came in at number 2 in the ORX Covid Risk Review, is another risk directly impacted by the increase of People risk.

Banks and insurers alike raised concerns in this survey over the increase in cyber and information security risk as a result of the rise in remote working arrangements.

Steve Bishop, who heads up Cyber & Information Security risk at ORX, said:

“It is more important than ever to ensure employees follow correct security protocols for payments, customer identification and trading, as well as the management of sensitive data. However, as these are now all having to take place outside of the office – often for the first time ever – firms must find virtual ways of implementing robust security policies and supervision controls.”

Despite the increase in concern around employees and the dramatically changed risk profile due to coronavirus, what is most important is that businesses are already looking to the future.

Carrivick said: “If businesses don’t manage the impacts of coronavirus – including on their employees – this will very likely be detrimental to their customers, reputations and long-term success.

“At ORX, we believe that industry-wide collaboration is one of the key components of effective risk management response. Businesses need to work together and share insights such as those in our

Covid Risk Review survey in order to be as well prepared for the future as possible.”