How to effectively reduce human capital risk

Human capital risk is often rewarded a mere cursory glance. That is, until something bad happens. As a business owner or representative of your company’s HR team, there is a duty of care to be observed, and it begins with the interview process.

Optimism bias is an interesting concept. It refers to the belief that we’re less likely to experience a negative event. In a business context this can refer to incidences of workplace violence, or ‘victimless’ crimes such as commercial theft and fraud that happen across town, in less affluent neighbourhoods, or to a competitor.

But the reality is that you can no more predict that crime will or won’t happen in your business than being able to predict the team who’ll win the next Rugby World Cup.

A business’s duty of care – it’s responsibility toward its own employees and members of public – boils down to effective risk management strategies, of which the aim is to minimise the potential of adverse incidents in and outside the workplace.

Human capital risk management means ignoring the apparent comfort of optimism bias and performing due diligence on every employee throughout their period of employment.

Risk Assessment

Human capital risk assessment is in itself a strategy at the core of a business’s duty of care. It requires business owners and HR personnel to determine a business’s risk appetite and risk tolerance.

Risk appetite in this context refers to the broader risk the organisation is willing to accept. For example, accepting job applicants with criminal records for certain minor offences for any position whilst rejecting those that pass over a criminal record ‘threshold’.

Risk tolerance is the level of tolerated risk associated with the individual; some positions in a business are more sensitive and therefore may require additional screening measures: does a polygraph test reveal that an applicant for your financial department was implicated (but not charged) in an instance of fraud at a previous workplace?

Determining a screening strategy

An initial screening strategy with risk appetite and risk tolerance factored in can be segmented into two phases:

Interview / hiring

• CV Verification (risk appetite: e.g. “minimum bachelors degree”)
• Credential & reference verification (risk appetite: e.g. applicants who lied immediately rejected)
• Identity verification (risk appetite: ID theft instances rejected and reported to police)
• Criminal record check (risk appetite / tolerance: what’s the maximum offence that can be tolerated at entry? Are more stringent measures in place for sensitive positions? )
• Polygraph test (risk appetite / tolerance: do you only need to verify the character of a candidate, or do you need to run initial / continual checks for affiliations with criminal syndicates, etc.)
• Credit check (risk appetite / tolerance: will you only hire individuals with a good credit score? Are ‘slow payers’ accepted or rejected? Is it important that your employees maintain a good credit rating?)

Continuous / Employment

• Criminal record check
• Polygraph test
• Credit check

This strategy can be fine-tuned as a clearer understanding of the human capital risks is gained over time.

But for many businesses employment screening may be both cumbersome and expensive. Due diligence (and therefore a duty of care) is a continuous process that begins with the interview process and spans throughout an individuals period of employment. Agency fees, delays, and the complexity of managing per applicant or employee screening results are some of the hurdles faced by SME and enterprise organisations throughout South Africa.

MyScreening Vault

The myScreening Vault is an online background screening portal that simplifies background screening and records management. The cloud-based application makes it easy to create a searchable personal Vault for each applicant and employee, and to request checks and verifications based on a company’s human capital risk management strategy. Individual and bulk checks can be run once, or scheduled to run periodically as part of a business’s continuous risk management strategy.

Importantly, all records associated with an applicant or employee will always be accessible, even if the applicant doesn’t get the job, or the employee leaves. These records can be shared with other departments and branches to easily keep track of people, helping business owners and HR to reduce risk, and exercise a continuous duty of care.

Learn more about myScreening Vault