Companies should look beyond the surface level to accurately quantify the risks associated with people and behaviour.
That is according to Steve Saporito, Chief Executive for the Americas at Willis Global Solutions Consulting Group who was recently featured in a special report on risk management in the Financial Times.
“Whether it is failure to attract and retain critical staff, high turnover or poor succession planning in case important personnel leave, it is important to dig below the surface,” according to Saporito.
The article was inspired by a spate of recent corporate scandals; from the alleged rigging of the Libor benchmark interest rate to the phone hacking scandal, all of which have highlighted the need to adequately manage the risks presented by people.
“It is essential to get a good understanding of the risk, both at the surface level and below the surface, to get some sort of qualitative five-by-five matrix of likelihood and severity to comparatively measure that risk against other risks,” Mr Saporito says.
Also featured in the FT report is Julian Martin, Executive Director of Willis’s Financial and Executive Risks Practice (Finex) and Directors and Officers (D&O) Practice Leader who says that multinational companies need a global D&O programme to ensure local legal compliance in a given jurisdiction.
As the Willis and Allen & Overy 2011 Directors liability survey reveals, directors and officers are increasingly concerned about the risk of being sued abroad.
Mr Martin explains that a global D&O programme is far more complex than purchasing one policy for the parent company and hoping it will provide global coverage for all subsidiaries wherever they are located.
The report is well worth a read for more insight into people risk.