People Risk

In this section:

Overview | People Risk by Region | People Risk by Role


A recurring theme in this year’s report relates to a category of risk we can broadly describe as “people risk.” Although the survey posed no questions about people risk as such, this risk goes hand in hand with two risks in the top 15: failure to attract or retain top talent (ranked at number 13) and workforce shortages (ranked at number 14). Another 10 risks in the list of 60 also involve people risks. These include work injuries, an aging workforce, absenteeism, inadequate succession planning, fraud or embezzlement, theft, harassment or discrimination, gender pay gaps, extortion, and kidnap and ransom. Furthermore, numerous other risks — for example, rising healthcare costs, loss of intellectual property risk and, most importantly, cyber risk — also include a people risk component.

The confluence of the remote workforce, heightened stress and employee disengagement during the pandemic have only reinforced the axiom that workers are the weakest link in cyber security. Working from home has distributed greater responsibility for maintaining good cyber-security practices to workers. In addition, stressed and disengaged employees are more likely to make mistakes when using technology or deliberately circumvent cyber-security measures. These actions expose employers to a range of risks, including loss of intellectual property, punitive regulatory action or reputational harm. The number of cyber-security incidents attributed to insiders has increased by 47 percent since the start of the pandemic. Now more than ever, these interconnected people risks highlight the increasing importance of collaboration between risk leaders and the chief human resources officer (CHRO) in managing these risk topics.

When viewed through this broader lens, the magnitude of people risks becomes clearer. People risks are underestimated within organizations and should be elevated on the agenda for risk managers and C-suite executives. This is especially true in light of another theme that arose from this year’s report: that people assets are more important than ever.

Concerns about workforce shortages ranked at number 14 in 2021, up from 29 in 2017. Workforce shortages frequently result from a mismatch between required skills and available talent. Unlike jobs of the past, which demanded physical aptitude and basic communications and computational skills, today’s jobs increasingly require a mix of specific technical skills, data and analytics fluency, a creative mindset, agility, curiosity and emotional competencies.

The COVID-19 crisis exacerbated the talent mismatch by accelerating digital transformation in many industries, heightening the need for new skills and competencies. Additionally, accelerated industry convergence resulting from digital transformation has meant increased competition for the same talents. For example, finance companies are reinventing their employee value propositions to compete for digital talent with the technology sector, which is known for offering high salaries, attractive equity opportunities and innovative workspaces and benefits.

Meanwhile, the pandemic forced many companies to shift to remote or hybrid work models — a trend that seems likely to endure. On the one hand, companies benefit from this trend through access to global talent pools; workers in countries such as China, Singapore and South Korea that have invested heavily in digital are in especially high demand. On the other hand, countless other companies are also competing for access to this same workforce.

The pandemic also prompted an employee reckoning, with workers quitting their jobs in record numbers. An article published by the World Economic Forum cites Microsoft surveys showing that 41 percent of workers globally are thinking about leaving their current companies — a trend known as “the great resignation.”

Companies in many industries are redesigning their workforce strategies to attract and retain talent and stay relevant as employers. This includes organization design, location strategy, remote work policies, talent requirements for the future world of work and plans for developing, attracting and retaining people. Companies that do not have winning strategies in the competition for talent are at high risk of decline.

People Risk by Region

Aging workforces and related health issues ranked at number 35 on the list of risks this year; however, this is a prevailing trend in many G-20 countries, no doubt contributing to the more highly ranked workforce-shortage risk. According to a report by the International Labour Office and the OECD, during the next decade the labor force will shrink in China, France, Germany, Italy, Japan, Korea, Russia and Spain.

Meanwhile, Australia, Brazil, India, Indonesia, Mexico, Saudi Arabia, South Africa and Turkey have more young people than jobs available for them. “Turning the demographic dividend into skilled workforce for attracting investments and creating jobs will be crucial in these countries,” the report authors note.

Respondents from only two regions, North America and Asia Pacific, include failure to attract top talent among their lists of top 10 risks. U.S. companies in particular responded aggressively to the COVID-19 crisis by moving to furlough or lay off employees. Now many of those same companies are struggling to refill their ranks amid an overall war for talent. U.S. companies also are more likely to use hiring as a core strategy to acquire new skills compared with European organizations, which are more likely to address a mismatch with retraining.

Europe has lagged the U.S. and Asia Pacific in the digital-transformation journey, which may explain why respondents in EMEA rank this risk lower (at number 14) than their regional counterparts do. An article in Euronews reports that fewer than one-fifth of companies in Europe are “highly digitized,” and only 12 percent use big data analytics, according to the European Commission. Indeed, the combined market capitalization of all European technology companies founded since 2000 is less than either Amazon or Apple alone, Tech Monitor reports.

Meanwhile, Asia has the potential to leapfrog the rest of the world in digital transformation based on the scale of its markets and investment and the huge proportion of STEM graduates in the region. Yet demand for talent with the necessary skills and competencies is outstripping supply, and multinational companies present serious competition for the region’s talent.

Talent challenges are holding back Asia’s growth potential. Japan has the toughest demographic challenges in light of its declining and aging population. China, which also has a shrinking labor force and rapidly aging society, will soon confront a shortage of professionals to fill technology roles. India has one of the world’s largest work-age populations; however, it also has one of the lowest rates of women in the workforce in the world. Additionally, India is known for a disparity between classroom learning and practical application, with education that does not meet global standards. Indonesia, with 250 million people, has the fourth largest population in the world, but it also has too many unskilled workers and not enough skilled ones. This mismatch affects as much as 25 percent of the labor force and is expected to endure, according to the OECD.

Finally, neither failure to attract top talent nor workforce shortages ranked among the top 10 risks in Latin America or the Middle East and Africa. More prevalent risks in these regions include economic slowdown, business interruption, commodity price risk and exchange-rate fluctuation.

People Risk by Role

Survey respondents in C-suite roles ranked failure to attract top talent higher in their lists of top risks than risk managers or finance managers did. All C-suite respondents included this risk among their top 10 risks, with CEOs and presidents ranking it highest at number three. By comparison, none of the respondents in manager roles included this risk among their top 10, pointing at a less than integrated risk management approach between corporate and people risks.


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