6-4 Risk Management Plan Project

Kelly Fritz
September 5, 2021

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 Introduction

According to the Small Business Administration data released in 2019, about 20% of

business startups fail during the first year. Within five years, about half of all businesses fail.

By the tenth year, only approximately 33% of those remaining survived (Team ZenBusiness,

2021). A significant part of this failure may be attributed to the absence of a well-developed

risk management plan. One of the most critical things a company can do is to understand risk

and how to effectively mitigate it.  A solid risk management strategy may help any business

prepare for the majority of issues that may occur and will help protect the organization from

failure. By implementing a risk management plan and considering the various

potential risks or events before they occur, an organization can save money and

protect their future (Cole, 2020).

Potential Impact: legal, safety, environmental, and financial risk

In the summary by Ernst and Young, risks such as legal, safety, environmental and financial

were identified as well as opportunities and growth. Price pressure, cost cutting, market risks,

macroeconomic risk, management talent shortages, expanded government involvement,

regulations and compliance, sovereign debt, emerging technologies, and political shocks are

among the top ten risks listed in the executive summary. (Ernst & Young 2013). The summary

identifies price pressure as the most significant financial concern, followed by cost cutting. The

most serious legal and safety risk identified is those of regulation and compliance. HR

professionals must be able to understand and navigate these laws to help their organizations

remain compliant and avoid having to pay fines or penalties (Human Resource Management

and Compliance – Principles of Management, 2019). Some of the most common examples of

laws and regulations that HR managers need to understand and be able to successfully

navigate to keep a business compliant include Age Discrimination in Employment Act,

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Americans with Disabilities Act, Fair Labor Standards Act, Family and Medical Leave Act,

National Labor Relations Act, Worker Adjustment and Retraining Notification Act (Human

Resource Management and Compliance – Principles of Management, 2019).

Internal risks are from within the company and arise during normal operation that are often

foreseeable and therefore be avoided or mitigated (Internal and External Risks, 2016). They

are often generated by human, technical, or physical factors. Internal risks include labor

shortages, poor morale, or technology issues. HR can mitigate these risks by making sure to

educate staff on safety protocols set by OHSHA, improving retention can help reduce internal

risks by boosting employee morale through effective compensation and empowerment

(Beers, 2021).

Businesses must also consider ethics and how they can affect a company's reputation, either

positively or negatively. Companies that have lost the trust and confidence of their

stakeholders and customers as a result of unethical choices may have difficulty recruiting and

retaining employees, as well as losing consumer confidence and, as a result, sales. HR

practices that contribute to ethical behavior include providing training and development,

mentoring, coaching, and counseling their workforce.

Society, Culture, Politics, Health, Safety and Security

Businesses are influenced by society, culture, politics, health, safety, and security . Now

more than ever, companies are being held accountable by society. Consumers have a

significant influence on a business, therefore companies are always trying to satisfy their

wants and needs. If a business fails to satisfy the demands of its customers, it could

potentially fall behind or even collapse. Consumers also have an expectation of companies

taking a environmental stance. Poor environmental practices can lead to legal ramification

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and create a poor reputation that can be difficult to recover from economically. A company

must allocate funds to sustain healthy environmental practices. Human resource

professionals must be knowledgeable with federal and state regulations governing

workplace safety in order to guarantee that employees and the business as a whole are

working in a safe environment. To guarantee that a business is in compliance with OSHA

requirements, human resource professionals should require all workers to attend work place

safety courses. Companies must also focus on security in order to protect themselves. In

today's environment, when IT security breaches are common, angry employees have

harmed others, and internal data breaches occur, it is critical that a company prioritizes

security. Human resource professionals can require trainings such as ALICE, to ensure the

safety of others. They can also hold classes on IT topics to keep employees well informed

on current technology to help mitigate risks.

Employment Law

Along from being costly to businesses, employment law breaches may have severe

repercussions. This risk may be mitigated if human resource professionals and senior

management are knowledgeable of and compliant with both federal and state labor laws. A

few of the most common laws are the Family Medical Leave Act (FMLA), Americans with

Disabilities Act (ADA), Affordable Care Act (ACA), Occupational Safety and Health Act

(OSHA), Wage and Hours laws and Title VII (Race, National Origin, Religion, and Sex

discrimination) (Federal Employment & Labor Laws, 2021). HR professionals need to keep

current on ever changing labor laws to ensure that the company is compliant.

Conclusion

Businesses cannot separate themselves from risks in a global market, but risks may be

reduced by appropriate education and training. When a firm does a thorough risk assessment

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and uses the results to develop a risk management plan, they are taking measures to guarantee

the company's safety and future.

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Beers, B. (2021, June 28). How Companies Can Reduce Internal and External Business Risk.
Investopedia. https://www.investopedia.com/ask/answers/050115/how-can-
companies-reduce-internal-and-external-business-risk.asp

Cole, B. (2020, April 7). risk management. SearchCompliance.

Federal Employment & Labor Laws. (2021, February 3). Employment Law Handbook.
https://www.employmentlawhandbook.com/federal-employment-and-labor-laws/

Human Resource Management and Compliance – Principles of Management. (2019, March

Internal and External Risks. (2016, September 15). Software Process and Measurement.
https://tcagley.wordpress.com/2016/09/13/internal-and-external-risks/

Mayhew, R. (2017, November 21). HR Practices That Can Contribute to Ethical Behavior.
Your Business. https://yourbusiness.azcentral.com/hr-practices-can-contribute-
ethical-behavior-16203.html

Team ZenBusiness. (2021, August 27). Why Small Businesses Fail: Top 8 Reasons for
Startup Failure. ZenBusiness Inc. https://www.zenbusiness.com/blog/why-small-
businesses-fail/

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