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Risk: A Balancing Act That Can Fuel Your Success

By Joanna Monroe posted 06-12-2019 11:03

  

We have all been there in business. A new law comes out, we translate it into a policy, establish a process, and communicate the change. At some point, it becomes clear that the impact of the regulation is untenable; it’s too expensive, it’s a burden on operations; or it requires a technology “fix” that would displace higher-priority projects.

Ultimately, the roll-out is mired down and its implementation forgotten. Fast forward two years, when a process server appears with a complaint for damages. “Oh, yeah,” you think, “didn’t we do something about that?” as you hear the sound of a ball hitting the grass.

Lawsuits and investigations are just two of the dozens of hazards to be negotiated, as staffing firms face revenue, operational, competitive, and other business risks. All too often, companies are forced to choose between revenue and compliance.

Case in point: The new California sexual harassment law. As of 2019, staffing firms must provide employees with one hour of sexual harassment training every two years.  If the employee is expected to work less than six months, the training must be completed within the first 30 days of employment or before completing 100 working hours, whichever comes first.  And let’s not forget, you must pay the employee for training time.

Given the high turnover nature of staffing, the cost of providing training in the onboarding process is prohibitive. But if firms don’t comply, it could mean costly litigation. What’s a company  to do?

The best staffing firms are risk intelligent. They have a formal and active process for balancing risk and reward. They create value by taking risks and lose value by failing to manage them. They earn a competitive advantage through seizing opportunities and managing downside.  

A risk intelligent firm would evaluate the cost of compliance the California law against the risk of litigation and propose a solution that strikes an appropriate balance. For example, the firm might focus on hiring employees who have already taken the training. Or, they may decide to wait 90 days or 300 hundred hours before offering the training and tolerate the risk of the approach. The key is putting a financial calculation on the business downside as well as the  compliance consequence, comparing them, and getting alignment on the strategy at the right level in the organization.

Here are four things you can do strengthen your firm’s RQ (risk intelligence):

  1. Implement a formal program to assess your risks regularly.
  2. Assign executive-level ownership and document key mitigation and controls.
  3. Create a risk committee to reduce silos and bring a consensus view.
  4. Ensure that the revenue vs. compliance call is made at the right level in the organization. The greater the risk, the higher it needs to be escalated.

 

Threats are part of your everyday operation. They need not be feared. In fact, by facing them head on through strong governance and process, you will protect your company, and not only survive, but thrive.

(First published in SIA Staffing Stream)

 

 

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